Stocks fell Monday as investors took a pause from a historic rally in September and held back ahead of a busy week of economic and earnings reports.
The Dow Jones industrial average lost nearly 80 points after factory orders fell slightly more than expected in August and contracts for new homes remained far below last year's pace.
Analysts say the market was due for a pullback following a 10.4 percent gain in the Dow last month. The monthlong rally has come on relatively low volume, a sign that many investors are still waiting on the sidelines.
In corporate news, American Express Co. sank 6.5 percent after the Justice Department hit the credit card company with an antitrust suit. The government also sued MasterCard and Visa but announced proposed settlements with those two.
Doug Roberts, chief investment strategist at Channel Capital Research, said the market has been trading in a broad range over the past six months. With it approaching the high end of that range, a pullback is not surprising, he said.
The market has been "alternating between euphoria and despair," Roberts said of the wide trading range dating back to late April, when stocks hit their high for the year.
This week brings a number of potentially important news events for stocks, including Friday's monthly jobs survey and earnings on Thursday from Dow industrials component Alcoa Inc., a report that marks the traditional kickoff to the quarterly earnings season.
France's Sanofi-Aventis launched an $18.5 billion hostile takeover offer for Genzyme Corp. Sanofi-Aventis' previous offer was rejected by Genzyme's board, so it is now taking the offer directly to shareholders. The offer, at $69 per share, is unchanged from Sanofi-Aventis' original offer in July.
The Dow Jones industrial average fell 78.41, or 0.7 percent, to close at 10,751.27
The Standard & Poor's 500 index fell 9.21, or 0.8 percent, to 1,137.03. The Nasdaq composite index fell 26.23, or 1.1 percent, to 2,344.52.
The S&P 500 again came within two points of hitting 1,150. The index has come that close or crossed 1,150 each of the past seven days during trading. However, it has been unable to close above the key level during that stretch.
Mike Shea, managing partner at Direct Access Partners LLC, said optimistic profit outlooks from companies as they report earnings in the next few weeks would "absolutely get us through 1,150."
Factory orders fell 0.5 percent in August, slightly worse than the 0.4 percent drop predicted by economists polled by Thomson Reuters. But the drop was largely due to a steep falloff in commercial aircraft orders. Excluding transportation, orders rose 0.9 percent.
The number of buyers that signed contracts to purchase homes rose more than expected in August. The National Association of Realtors pending home sales index rose 4.3 percent, slightly better than the 2.5 percent jump economists predicted.
The housing market remains weak after a home buyer tax credit expired at the end of April. The pending home sales index is 20 percent below where it was just a year ago.
The week's blitz of economic reports and the start of earnings season should provide insight into the economy and help give the market direction. With unemployment still at 9.6 percent, traders will be most closely watching Friday's monthly jobs report.
Sanofi-Aventis shares fell 25 cents to $32.87. Genzyme shares rose 13 cents to $71.01. American Express fell $2.73 to $39.05.
Cautious investors continued to pour money into bonds, sending Treasury prices higher and their yields lower. The yield on the 10-year Treasury note, which helps set interest rates on loans, fell to 2.48 percent from 2.51 percent late Friday.
About three stocks fell for every one that rose on the New York Stock Exchange where consolidated volume came to 3.7 billion shares.