MARKET SNAPSHOT: U.S. Stocks Turn Lower In Low Volume

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks turned lower on Monday after a downbeat U.S. economic report did little to change the belief that the Federal Reserve would likely tighten monetary policy in September.

"The market is trying to build in ahead of time" the consensus view that the central bank would begin cutting back on its $85 billion in monthly bond purchases next month, and if not then, in December, Randy Frederick, managing director of active trading and derivatives at Charles Schwab, said of Wall Street's pullback the past three weeks.

Data showing a steep drop in orders for U.S. factory goods were "really awful," Frederick added.

Trading volume is extraordinarily low, so what had been tepid climb could also be explained by some bargain hunting by "a few institutional investors," Frederick said.

After rising as much as 39 points and falling 65, the Dow Jones Industrial Average (DJI) was lately down 46.25 points, or 0.3%, at 14,964.26. The S&P 500 index (SPX) lost 5.17 points, or 0.3%, to 1,658.33, with telecommunications the worst performing and health care faring best of its 10 major sectors. The Nasdaq Composite (RIXF) gained almost 1 point to 3,658.61.

Treasury prices rose, with the yield on the 10-year note (10_YEAR) falling 2 basis points to 2.790%.

Orders for U.S. durable goods fell more than expected last month, down 7.3% in the largest drop in nearly a year. The decline in bookings for goods intended to last at least three years is the biggest drop since August 2012 after a 3.9% rise in June, the Commerce Department said.

Investors are looking at reports on the economy with a less-than-straight-forward view, given improvement is likely to bring on reduced monetary easing by the Federal Reserve sooner rather than later.

The central bank is expected to begin cutting its $85 billion in monthly bond purchases before the end of the year, with the market currently debating whether the move would begin in September or December.

"The August market-correction has been driven by tapering fear and higher interest rates. It appears to us that tapering is now almost fully discounted, while Treasury yields may have reached a ceiling," noted William Riegel, head of equity investment, and Lisa Black, head of global public fixed-income markets, at TIAA-CREF, in emailed commentary.

Decliners pulled ahead of advancers on the New York Stock Exchange, where 340 million shares traded as of 3:30 p.m. Eastern. Composite volume neared 1.9 billion.

Biotechnology-firm Amgen Inc. (AMGN) rallied 7.5% a day after the drug maker agreed to buy Onyx Pharmaceuticals Inc. (ONXX) for about $10.4 billion to gain access to its three cancer drugs. Shares of Onyx Pharmaceuticals were up 5.6%.

The dollar (DXY) gained against the currencies of U.S. trading partners, including the euro (EURUSD) .

After rising 1.9% last week, gold futures for December delivery (GCZ3) lost $2.70, or 0.2%, to settle at $1,393.10 an ounce. The price of oil fell, with crude futures for October delivery (CLV3) off 50 cents, or 0.5%, at $105.92 a barrel.

Up 14% on the year and down 3.4% in August, the Dow industrials on Friday marked a third consecutive weekly drop, the longest weekly losing streak since mid-November 2012. Both the S&P 500 and Nasdaq Composite gained last week, with the former off 1.6% in August but up 16% for the year and the latter up 0.9% for the month and 21% year-to-date.

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