Stocks fell modestly Monday in the absence of any major corporate or economic developments. Investors were cautious ahead of a two-day meeting of the Federal Reserve that starts Tuesday, and they're waiting for retail earnings reports to give some clues about consumer spending for the rest of the year.
Bond prices jumped as stocks fell. Monday's moves in both the stock and credit markets weren't surprising after major stock indexes shot up 1% last week. The Dow Jones industrials fell 32 points and all the major indexes each fell less than half a percentage point.
Investors want to see what the Fed has to say about how the economy is faring when its meeting ends Wednesday. It is widely expected the Fed will keep key interest rates steady at near zero, but Wall Street will be paying more attention to the economic assessment the Fed issues with its rate decision rather than any rate move itself.
"People want to see some words — some confidence — coming out of the Fed that the economy is improving," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.
Even if the Fed says areas like housing and unemployment are making gradual improvements, traders have other worries. Banks still have billions of dollars in bad debt and the Fed said in a snapshot of economic conditions at the end of July that commercial real estate activity continues to weaken.
Analysts are still concerned about how and when policymakers will withdraw the enormous support the Fed implemented in the fall to prop up the financial system and the overall economy. The economy must first be stable enough to withstand an increase in interest rates that would boost borrowing costs, including mortgage rates.
Consumers are expected to be one of the market's main concerns during August. Big retailers such as Wal-Mart Stores and Macy's report earnings this week, and others release results in the coming weeks. There appeared to be some nervousness ahead of those reports, as retailers were among the biggest losers Monday.
The Dow Jones industrial average fell 32.12, or 0.3%, to 9,337.95. The Standard & Poor's 500 index fell 3.38, or 0.3%, to 1,007.10, while the Nasdaq composite index fell 8.01, or 0.4%, to 1,992.24.
Eight stocks fell for every seven that rose on the New York Stock Exchange, where consolidated volume came to a light 5.44 billion shares, down from Friday's 7 billion.
In bond trading, the yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.78% from 3.86% late Friday. The gains follow a steep drop Friday after the employment hurt demand for the safety of government debt. Investors are also bracing for a record $75 billion auction of debt this week that starts Tuesday.
Analysts said the stock market's occasional retreats have been small in the past month and likely will continue to be mild because investors and money mangers who missed the rally have been buying when the market dips.
Traders say the pause in the gains is welcome after the S&P 500 index jumped 15% in just four weeks and 49% from a 12-year low in early March. Major indexes ended Friday at their highest levels since last fall.
"Taking a break is a good thing or else we'd see valuations exceeding fundamentals a little bit too much," said Jeffrey Phillips, chief investment officer at Rehmann Financial in Troy, Mich.
Among retail stocks, Macy's fell 76 cents, or 4.75%, to $15.23. Best Buy fell $2.09, or 5.26%, to $37.66.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 33 cents to settle at $70.60 a barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies fell 0.53, or 0.1%, to 571.87.
Overseas, Asian markets rose on a positive report on Japanese machinery orders, a key indicator of corporate capital spending. Japan's Nikkei stock average rose 1.1%.
Britain's FTSE 100 slipped 0.2%, Germany's DAX index lost 0.8%, and France's CAC-40 fell 0.5%.