Stock Market News Update
Monday, October 04, 2010


Monday saw the U.S. stocks finish near session lows following a midday sell-off, with the Dow and Nasdaq indexes posting their largest one-day losses in nearly a month, as investors remain cautious ahead of corporate earnings season and key employment data due later in the week.

Stocks started the day near the breakeven point, but selling accelerated as the session wore on. With little on the economic docket to attract investors, the September rally has lost its momentum.

After a brief trip into the black, stocks eventually swooned in the face of European debt concerns, discouraging economic data, and a dose of Dow-component drama. On the economic front, the Street balked at a steeper-than-expected slide in U.S. factory orders in August, which overshadowed news of a larger-than-expected rise in the National Association of Realtors' pending home sales index.

"We're just seeing a pullback from that," said Peter Cardillo, chief market economist at Avalon Partners. "We're going to get the monthly jobs report later this week, so volume will be light and the market could be volatile ahead of that release."

"We'll continue to see a lot of mixed signals," said Karl Mills, president and chief investment officer at Jurika Mills and Keifer. "I think it will be hard for the market to repeat as strong of a month as what we just saw, but it'll depend on the companies' earnings and their outlooks."

Meanwhile, a batch of negative analyst notes fanned the blue chips' bearish flames, with Goldman Sachs cutting its rating on Microsoft Corp. (MSFT), and Deutsche Bank issuing a "sell" recommendation on Alcoa, Inc. (AA) just days before the company's unofficial start to the third-quarter earnings season. In addition, a spat between American Express (AXP) and the Justice Department added salt to the Dow's wounds, with the blue chip barometer kicking off the week 78 points south of breakeven.

Monday's selloff erased another slice of Wall Street's September surge, which added nearly 800 points to the Dow and was the markets' strongest September since 1939.

“You are getting a fourth-quarter reset. Money is obviously coming out of the high-tech space,” said Peter Kenny, managing director at Knight Capital Group.

Results for Major Market Indexes

The Dow Jones Industrial Average (DJIA – 10,751.27) finished with a loss of 78.41 points, or 0.72%.



The S&P 500 Index (SPX – 1,137.03) also had a loss, on the day, of 9.21 points, or 0.80%.


The Nasdaq Composite (COMP – 2,344.52), fared the worst of the major indexes, suffering a loss of 26.23 points, or 1.11%.

The Russell 2000 Index of smaller companies had a loss of 9.81 points, or 1.44%, to settle at 669.48.

Aside from the economic and technology headlines, Wall Street was hurt by American Express (AXP), which tumbled nearly 7% after the U.S. launched an antitrust probe into the credit card giant. Technology stocks like eBay (EBAY) also took a hit after Goldman Sachs downgraded software titan Microsoft (MSFT).

Most of the Dow's 30 components lost ground, led by aluminum maker Alcoa (AA) and AmEx. The index's best performers were JPMorgan Chase (JPM) and Verizon (VZ), which hit a 52-week high.

The Nasdaq Composite took a bigger hit than the broader markets and was dragged down by technology stocks like Dell (DELL) and Advanced Micro Devices (AMD).

Software titan Microsoft slumped 2% as Goldman Sachs reportedly removed its "buy" rating and cut its price target on the stock from $32 to $28. According to Reuters, Goldman said it is concerned in the near term about the threat of notebook cannibalization from tablet devices and the elongated PC refresh cycle.

Wall Street was also hurt by the euro, which slumped nearly 1% and slid below $1.37 amid concerns about the European debt crisis. A weaker euro tends to weigh on commodities and multinationals like General Electric (GE) that benefit from a weak dollar.

On the upside, the National Association of Realtors said pending home sales jumped by 4.3% in August, marking the second straight higher month and beating forecasts for a rise of 1%. Home builders like Toll Brothers (TOL) and Hovnanian (HOV) closed mixed in the wake of the report.

Trading Volume:

Volume was very light, suggesting traders were reluctant to build on recent gains but also unwilling to give up on September's 9 percent rally. Combined daily volume on the NYSE, Amex, and Nasdaq was about 6.84 billion shares, below its 20-day moving average of 7.23 billion.

Notes of Interest

The Dow Jones Industrial Average (DJIA): settled the session beneath its 10-day moving average for the first time since late August.

The S&P 500 Index’s (SPX) finished south of its own 10-day trendline for only the second time since Aug. 31.

The S&P 500 recently finished its best quarter in a year, although the index has been struggling to break out of the 1,130-1,150 range.

The index fell back below the 61.8 Fibonacci retracement of its April to July pullback at 1,140 and moved back towards support at 1,130, a level the index struggled against, finally climbing above it in late September.

S&P 500 short-term technical indicators showed sell signals during the day. The benchmark index's 10-day momentum closed below zero, indicating a short-term trend reversal. The trend lines of the moving average convergence-divergence (MACD) indicator crossed at oversold levels on an intraday basis but retreated at the close.

The Nasdaq Composite (COMP), the tech-rich index, ended beneath its 10-day moving average for the first time in more than a month.

Crude futures retreated from a two-month peak today, thanks to a stronger dollar. Renewed concerns about European debt lifted the greenback from a multi-month low versus the euro, making it more expensive for holders of foreign currencies to scoop up the dollar-denominated commodity. Against this backdrop, crude oil for November delivery shed 11 cents, or 0.1%, to finish at $81.47 per barrel.

Gold futures: A strengthening dollar also contributed to gold's pullback from record highs today. In addition, gold futures suffered as the governments highly anticipated employment data – slated to hit the Street on Friday – kept potential buyers on the sidelines. By the close, December-dated gold futures gave back $1, or 0.1%, to settle at $1,316.80 an ounce.

Bonds: Prices for U.S. Treasurys rose, pushing the yield on the 10-year note down to 2.48% from 2.51% late Friday. Bond prices and yields move in opposite directions. The 2-year yield touched a record low just below 0.40%.

Economic Concerns

Pending Home Sales


Buying activity in the housing market increased for a second consecutive month, according to a report from the National Association of Realtors, but housing still remains in the doldrums following the expiration of tax credits earlier in the year.

According to the NAR, the industry group’s pending homes sales index rose 4.3% in August compared with a downwardly-revised 78.9 reading for July.

The rise was more than expected, with economists looking for the index to rise 1% for August, but the index remains down 20.1% from a year ago.

Since the expiration of the first-time home buyers tax credit in April, home buying activity has stalled among both existing homes and new construction. This is despite record-low mortgage rates and a credit market that continues to ease relative to 2008 and 2009.

NAR’s chief economist, Lawrence Yun, said for home buying activity to rise without the help of tax credits “[will depend] more on job creation and an accompanying rise in consumer confidence.”

Pending home sales are a forward-looking indicator that tracks contracts signed on residential real estate, not on sales completed.

Regionally, housing buying activity in the Northeast fell by 2.9% in August but remains up 28.8% from a year ago. Midwest sales rose 2.1% and are down 26.5% from 2009. In the South, pending home sales rose 6.7% and are down 13.1% from August 2009. Sales in the West rose 6.4% but are down 19.6% below last year.

Factory Orders

New orders received by U.S. factories fell by 0.5 percent in August, resuming a downtrend as demand for transportation equipment fell sharply, according to a Commerce Department report on Monday.

Total orders fell to a seasonally adjusted $408.9 billion after an upwardly revised 0.5 percent increase in July and a 0.6 percent fall in June. Economists surveyed by Reuters had forecast a decline of 0.4 percent in August.

The August decline in factory orders was due mainly to a 10.2 percent decline in the volatile transportation equipment segment, in which motor vehicle-related orders were off 3.6 percent and non-defense aircraft down 40.2 percent. Excluding the transport segment, factory orders rose 0.9 percent.

Orders for machinery rose 5.2 percent in August, while orders for computers and electronic products rose 3.7 percent.

Overseas Concerns

Swiss regulators will require global banks UBS AG (UBS.N)(UBSN.VX) and Credit Suisse (CS.N)(CSGN.VX) to hold far more capital than their international rivals to prevent a crisis that could cripple the country. The new rules could crimp competitiveness in investment banking.

Concerns about Europe's banking system have been a headwind for U.S. stocks in recent months, even as some improving domestic data eased concerns over a possible double-dip recession. The S&P 500 recently finished its best quarter in a year, though the index has struggled to break out of the 1,130-1,150 range.

"These austerity measures are necessary, but don't have a stimulating effect on the market," said Malcolm Polley, president and chief investment officer of Stewart Capital Advisors in Indiana, Pennsylvania. "It could mean that equity returns will be muted, though not necessarily down, for quite a while."

The Irish central bank said on Monday Ireland's economy will crawl to a virtual halt this year, while Greece forecast the economy will contract 2.6 percent next year after a 4.0 percent slump in 2010. Portuguese officials urged unity on austerity measures in the face of opposition.

"The whole sovereign debt crisis continues to unfold in a negative manner," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co. in San Francisco. That is "hurting the euro, boosting the dollar and weighing on stocks."

In currencies: The dollar rose against the euro and the Japanese yen, but fell slightly against the British pound.

Overseas Markets

European Markets declined Monday. The CAC 40 in France and Germany's DAX closed down at 1.2%. Britain's FTSE 100 fell 0.7%

In Asian Markets, the Hang Seng gained nearly 1.2%. Japan's Nikkei finished the session down 0.3%. The Bank of Japan started a two-day policy meeting. The Shanghai Composite was closed for Golden Week.

Company Earnings Reports

Mosaic Co. (MOS)


Mosaic Co. (MOS) posted strong gains in both profit and revenue in the fiscal first quarter, but the company missed expectations on the bottom line, putting downward pressure on shares in after-hours trading.

The fertilizer company reported a fiscal first-quarter profit of $297.7 million, or 67 cents a share, compared with year-ago earnings of $100.6 million, or 23 cents a share.

Revenue rose to $2.19 billion, up from net sales of $1.5 billion in the first quarter of last year, as gross margin widened to 23.1%, up from 15.2%, one year ago.

While revenue beat expectations, the company missed estimates for the bottom line. Analysts had predicted earnings of 70 cents a share on revenue of $1.96 billion, according to analysts polled by Thomson Reuters.

Mosaic’s president and chief executive officer Jim Prokopanko said in a statement that market developments have made the crop nutrient sector an attractive long-term investment.

"Farmers need to plant record areas and harvest ever increasing yields to meet the world's accelerating appetite for grains and oilseeds. That implies strong growth in global crop nutrient markets,” Prokopanko said. “As the leading producer of potash and phosphate, there is no company better positioned to capture this upward momentum than Mosaic."

Shares of Mosaic fell 83 cents, or 1.4%, in Monday’s session, closing at $58.79 a share. The stock was down another $1.01, or 1.8%, in electronic trading, following the announcement of quarterly results.

SinoCoking Coal and Coke Chemical Industries Inc (SCOK)


SinoCoking Coal and Coke Chemical Industries Inc (SCOK) posted a lower-than-expected fourth-quarter profit hurt by lower coke prices.

The company said it expects revenue for 2011 to nearly double to $114.9 million, and net income to rise 13 percent to $16.8 million.

For the April-June quarter, the company reported net income of $64.5 million, or $2.91 per share, compared with $6.3 million, or 48 cents per share, last year.

The company earned 3 cents for the quarter, excluding a gain of $63.9 million for the change in fair value of warrants.

Revenue for the quarter fell 30 percent to $10.9 million.

Two analysts were looking for a profit of 8 cents a share on revenue of $10.1 million, according to Thomson Reuters.

Shares of SinoCoking were down 11 percent at $8.23 in early morning trade Monday on Nasdaq. The stock has fallen 83 percent since touching a year-high of $53.70 in early March.

Company News and Movements


American Express (AXP) closed down 6.5% as the U.S. Justice Department filed an antitrust lawsuit against the credit card giant. The suit alleges AmEx’s merchant agreements unfairly force merchants to take its higher-fee cards over competitors Visa (V) and MasterCard (MA).

Sara Lee’s (SLE) stock soared 7% after the New York Post reported the maker of Ball Park franks rejected an unsolicited leveraged buyout bid worth $12 billion from Henry Kravis and his KKR buyout firm. If it doesn’t have to swallow Sara Lee’s bakery business, Anglo-Dutch food conglomerate Uniliver (UN) could also reportedly be interested.

Sanofi-Aventis (SNY) launched an $18.5 billion hostile takeover attempt for U.S.-based biopharmaceutical company Genzyme (GENZ). The all-cash offer values Cambridge, Mass.-based Genzyme at $69 a share and reflects a 31% premium over the one-month average share price through July 22, when news about a potential deal broke.



Options Movement

Yum! Brands, Inc. (YUM)

Yum! Brands, Inc. (YUM) – the company responsible for such fast-food franchises as KFC, Taco Bell, and Pizza Hut – is expected to step into the earnings spotlight after the closing bell tomorrow. Analysts at Deutsche Bank said the Street's expectations are relatively high heading into the event, meaning "quite a bit of good news" is already priced into the shares. Nevertheless, the brokerage firm says YUM could still impress tomorrow – especially if it delivers evidence of improving consumer trends in China and stronger-than-anticipated same-store sales in the U.S.


Taking a look at the equity's sentiment backdrop echoes Deutsche Bank's theory of elevated expectations for YUM. According to Zacks, the stock has earned eight "strong buys" and two "buy" endorsements, compared to 10 lukewarm "holds" and not a "sell" rating in sight.

However, the pre-earnings optimism for YUM isn't confined to the analyst crowd. During the past couple of weeks, speculators on the International Securities Exchange (ISE) have bought to open nearly seven YUM calls for every put, as evidenced by the stock's 10-day call/put volume ratio of 6.78. What's more, this reading registers in the 98th annual percentile, suggesting that options players on the ISE have initiated bullish bets over bearish at a faster pace just 2% of the time during the past year.

In the October series of options, the near-the-money 47 strike has attracted the bulk of the attention, with call open interest advancing by roughly 2,100 contracts during the past two weeks. As such, the 47 strike is now home to peak call open interest in the front-month series, with almost 4,000 contracts in residence. By purchasing to open the October 47 calls, the buyers are betting the shares of YUM will surmount the $47 level within the options' lifetime.


However, this accumulation of bullish bets could actually translate into a challenge on the charts for YUM in the near term. Historically speaking, the stock has stair-stepped higher during the past couple of years, and since breaching resistance in the $43 region last month, is on the cusp of all-time high territory. Nevertheless, the notable batch of call open interest at the October 47 strike could exert options-related resistance for YUM over the next couple of weeks.


In conclusion, as the aforementioned Deutsche Bank analysts alluded to earlier, the elevated expectations ahead of YUM's turn in the earnings confessional could leave the shares vulnerable to a post-earnings pullback. A weaker-than-anticipated third-quarter report could spark an onslaught of downgrades or an unwinding of optimism in the options pits – both potential catalysts lower for the shares. On the flip side, any upward momentum on the heels of a stronger-than-predicted quarterly report could run into a roadblock, thanks to options-related resistance in the $47 region.

Starbucks Corporation

Call volume swelled to five times the norm on SBUX last Friday, with roughly 13,000 contracts crossing the tape. Meanwhile, fewer than 3,100 puts were exchanged on the coffee concern.

This bias toward bullish bets was evident on the International Securities Exchange (ISE), where traders on Friday bought to open 3,045 calls on SBUX, compared to just 13 puts. The security's single-day call/put volume ratio of 234.23 underscores a strong skew toward calls over puts.

In fact, SBUX now sports a 10-day ISE call/put volume ratio of 8.31, as traders have purchased more than eight calls for every put during the past two weeks. This ratio ranks above 99.6% of comparable readings taken during the past year, as options players on the ISE have rarely scooped up calls over puts at a faster pace.


Likewise, SBUX's put/call open interest ratio (SOIR) of 0.77 arrives in the seventh annual percentile. This slim percentile rank reveals that short-term speculators have been more optimistically aligned only 7% of the time during the previous 12 months.

Friday's most popular strike was SBUX's January 2011 25-strike call, where 4,018 contracts crossed the tape. Open interest at this strike climbed over the weekend by 2,255 contracts, confirming that new bullish bets were added here.

However, it's worth noting that short interest on SBUX rose by 4.9% during the past month, increasing by 4.4% during just the most recent reporting period. With short interest and buy-to-open call volume rising in step, it's worth considering the idea that bearish bettors have been buying calls only to limit their upside risk.

And the shorts certainly have just cause to hedge their bets. Despite a recent pullback, SBUX found support in the $22.50 region, and has since reclaimed a perch above its 10-week and 20-week moving averages. These trendlines helped to guide SBUX consistently higher from March 2009 through June 2010, and could now resume their role as double-barreled technical support.


MetLife, Inc. (MET)

MetLife, Inc. (MET) was the subject of a negative analyst note today, as analysts at Citigroup reduced their price target on the insurer from $55 to $50. This price-target cut is not a complete surprise, however, as MET has been in a technical slump for the past several months. In fact, since May, the shares have been range-bound in the $37 to $42 neighborhood.

Option players have flocked to MET in the wake of this morning's bearish brokerage note, with volume of over 8,000 contracts crossing the tape -- well above the stock's expected single-session volume of fewer than 6,500 contracts.

Most popular has been MET's October 40 call, with 1,271 contracts changing hands on this strike -- 64% of which traded at the bid price, indicating they were likely sold. With some 4,400 contracts currently open at this out-of-the-money strike, we'll have to wait until tomorrow to confirm whether these calls are fresh positions. If these calls were, in fact, sold to open, then it would seem that some traders are counting on MET to remain beneath the round-number $40 level over the next two weeks.

Option players maintain a skeptical outlook on MET. The equity's put/call open interest ratio (SOIR) of 0.92 ranks in the 75th annual percentile, revealing that near-term traders have been more bearishly aligned toward MET just one-quarter of the time during the past year.

Genzyme Corporation (GENZ)

Shares of Genzyme Corporation (GENZ) are up today, as Sanofi-Aventis (SNY) launched a hostile $18.5 billion takeover bid on the biotech. GENZ's board has advised the company to take no action on SNY's bid, which values the stock at $69 per share, and is thought by many to "undervalue" the equity.

Despite the uncertainty surrounding the takeover offer, one thing is clear: option players have flocked to GENZ at record speed today. Roughly 34,000 contracts have crossed the tape so far -- more than double the stock's expected single-session volume of around 13,000 contracts.

GENZ's October 70 call has been most popular today, with 6,370 contracts traded -- the bulk of which changed hands at the ask price, suggesting they were purchased. With open interest at this strike outnumbering today's volume, though, it's difficult to confirm whether these calls are, in fact, fresh positions. GENZ is currently trading around $70.91, making these 70-strike calls right at the money.

Technically speaking, GENZ has been trading between the $70 and $72 levels for the past several weeks, ever since rumors of a SNY takeover bid hit the Street.


The following companies also had some impressive options movements :-

Citigroup (C)

Options trading was brisk on Citigroup Inc. (C) on Friday, as more than 842,100 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 404,861 contracts, according to data from In addition, traders were feeling optimistic, as 79% of the volume crossed the tape on the call side.


Options traders have shown a preference for the stock's calls recently. The International Securities Exchange (ISE) has reported 7.56 calls purchased to open for every one put purchased to open during the past 10 trading sessions. This ratio of calls to puts is higher than 95% of all those taken during the past year, pointing to a growing optimism.

However, there is still ample room for optimism to grow toward the shares. The put/call open interest ratio (SOIR) comes in at 0.73, which is higher than 92% of all those taken during the past 12 months. In other words, short-term options players have been more pessimistically aligned toward the shares only 8% of the time during the past 52 weeks.

Meanwhile, Wall Street has a slight bullish bias. According to Zacks, the stock has earned 10 "strong buy" ratings, seven "holds," and two "sells."

Technically speaking, the shares of C remain locked in a sideways trading channel between support at the 3.55 level and resistance at the 4.30 level. The stock has been trapped in this range since May. However, the equity has rallied more than 23% since the beginning of the year, and climbed above resistance at its 10-month and 20-month moving averages.


EnCana Corporation (ECA)

EnCana Corporation was the center of some brisk options trading on Friday, as more than 41,500 contracts changed hands. This jump in volume was more than five times the stock's average daily trading volume of 8,276 contracts, according to data from In addition, approximately 86% of the volume crossed the tape on the call side.


The ISE reports a strong preference for calls on ECA. During the past two trading weeks, 8.5 calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 85.8% of the readings taken during the past 12 months, pointing to a rising optimism.

Furthermore, the SOIR for ECA comes in at 0.26, as call open interest nearly quadruples put open interest among options slated to expire in less than three months. This ratio of puts to calls is lower than all other readings taken during the past year. In other words, at no other time during the past 12 months have options players been more optimistically aligned toward ECA. Meanwhile, short interest is on the rise toward the stock.

During the past month, the number of ECA shares sold short jumped 46.9% to 15.4 million. This accumulation of bearish bets is nearly six times the stock's average daily trading volume. Short sellers could be using some of these calls as hedges to protect against an unexpected rise in the shares.

Wall Street has yet to fully jump on the stock's bandwagon. According to Zacks, the stock has earned seven "buy" ratings and 11 "holds."

From a technical perspective, the stock is down more than 6% since the beginning of 2010. A spring rally attempt was stopped cold at resistance in the 35 region, which was also the site of earlier resistance. The security has since retreated and is now struggling with its 10-week and 20-week moving averages as it attempts to bounce back.


Suncor Energy (SU)

Options traders flocked to Suncor Energy Inc. (SU) on Friday, as more than 29,500 contracts changed hands. This surge in volume was more than four times the stock's average daily trading volume, according to data from Furthermore, roughly 66% of the volume crossed the tape on the call side.


The ISE has seen a jump in call trading recently, as 3.3 calls have been purchased to open for every one put purchased to open during the past two trading weeks. This ratio of calls to puts is higher than 61% of all those taken during the past 12 months.

Meanwhile, there is still ample room for optimism to grow toward the shares. The SOIR for SU comes in at 0.63, which is higher than 70% of all those taken during the past 12 months. In other words, short-term options players have been more pessimistically aligned toward the shares only 30% of the time during the past 52 weeks.

What's more, pessimism among short sellers is on the rise. During the past month, the number of SU shares sold short increased by nearly 9% to 9.6 million. However, this buildup of bearish bets is only 2.2 times the stock's average daily trading volume.

Technically speaking, the shares of SU are down more than 5% since the beginning of the year. The security has fallen into a sideways channel between resistance at the 36 level and support at the 28 level.


SandRidge Energy Inc. (SD)

Call players flocked to SandRidge Energy Inc. (SD) on Friday, with some 24,000 of these typically bullish bets changing hands -- triple the energy issue's expected single-session call volume. However, upon further review, it seems that the bulk of Friday's call volume was not, in fact, bullish.


Friday's most popular option was the October 6 call, with nearly 8,000 contracts traded -- 82% of which changed hands at the bid price, revealing they were likely sold. Open interest increased significantly over the weekend, confirming that a fresh batch of short positions were added at this strike. By selling to open the October 6 call, traders are counting on SD to remain below the $6 level over the next two weeks.

In fact, SD has not surmounted the $6 level since July. Acting as an additional layer of resistance for the shares has been SD's descending 10-month moving average, which is currently located around the $6.50 level. This long-term moving average has guided the tech stock lower since October 2009.

Meanwhile, the brokerage bunch remains relatively bullish toward the struggling stock. According to Zacks, 10 out of 18 analysts rate SD a "buy" or better. As the stock continues to succumb to technical pressure, SD could be vulnerable to downgrades and/or price-target cuts from this optimistic group.

**Bullish flow detected in Marriott International (MAR), with 9780 calls trading, or 12x the recent average daily call volume in the name.

**Bullish flow detected in Electronic Arts (ERTS), with 13140 calls trading, or 4x the recent average daily call volume in the name.

**Bearish activity detected in H and R Block (HRB), with 9654 puts trading, or 5x the recent average daily put volume in the name.

Options activity is also picking up in CVS, Marvell (MRVL), and American Express (AXP).


U.S. stocks fell in light trading on Monday as investors took profits on recent gains, using middling economic data and worries about euro zone debt as a catalyst for shedding long positions.

The selling came as Wall Street prepares for the kickoff to earnings season, which officially begins Thursday evening when Alcoa releases its third-quarter results. Recent reports indicate analysts have been trimming their estimates for third-quarter profits amid the disappointingly slow economic recovery.

“Budding doubts about third-quarter corporate earnings later in the week, along with the September payrolls report looming has dented investor sentiment,” offered analysts at Action Economics.

Also, the Labor Department is scheduled to release its all-important monthly jobs report on Friday and the picture isn't likely to be pretty.

“Companies have pretty much squeezed all the water out of the rock that they can; it’s hard to see how we can manufacture 16% profit growth in a tepid revenue environment,” offered Harris Private Bank’s Ablin.

Analysts also said Wall Street was primed for a retreat after a September rally that pushed the Dow industrials up 10% for the month.

“Given the run of the past six weeks, we could see stocks meander or decline over the next week or two to work off some of the excess enthusiasm,” wrote Paul Nolte, managing director at Dearborn Partners, in a note.

Wall Street didn't find much of a reason to rally from a pair of new economic reports released on Monday. The Commerce Department said U.S. factory orders slid 0.5% in August after rising 0.1% the month before. Economists had forecasted a more modest decline of 0.4% and it was the third drop in four months.

Commodities stocks led the decliners in reaction to the rising dollar. The greenback was stronger as investors shifted away from the euro, which fell about 0.8 percent versus the dollar in late trading, on renewed concerns about euro-zone public debt. The S&P materials index .GSPM led the decline, falling 1.4 percent.

"We're coming off exceptionally strong performance," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "You probably have a little bit of an element of profit-taking that was maybe accelerated by the disappointing data points this morning."

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