Stocks finished in mixed mode on the first day of the fourth quarter after a reading on manufacturing activity reported a big jump in its prices paid component. This sparked inflation concerns and drove bond yields higher.
The Dow Jones industrial average fell 33.22 points, or 0.31%, to 10,535.48. The broader Standard & Poor's 500 index was down 2.11 points, or 0.17%, to 1,226.7. The tech-heavy Nasdaq composite index added 3.74 points, or 0.17%, to 2,155.43.
November West Texas Intermediate crude oil fell 77 cents to $65.47 a barrel. Front-month gasoline shed nearly 4 cents, to close at $2.06 a gallon, after peaking near $2.14 in early trading. Product prices eased as the U.S. administration said it would release strategic reserves of both crude and heating oil if it became necessary in the coming weeks, reports Action Economics.
On Monday, the ISM report, a gauge of national manufacturing activity, surged to 59.4 from 53.6 in August, contradicting expectations for some moderation, says Action Economics. Prices paid jumped to 78.0 after jumping to 62.5. New orders rebounded to 63.8 from 56.4. Employment rose to 53.1 from 52.6. is expected to fall to 52 from 53.6 in August.
Construction spending rose 0.4% in August from a 0.3% increase in July (revised from unchanged). Domestic auto sales were mixed.
Other highlights this week are Friday's employment report for September. Economists expect payrolls to drop around 143,000, and the unemployment rate to rise to 5.1% from 4.9% in August -- mostly due to disruptions caused by Hurricane Katrina.
Federal Reserve members will be on the speaking trail, and "could be one of the more telling indicators (versus hurricane distorted data) in terms of the policy outlook," says Action Economics.
Among stocks on the move, chip shares rose after the Semiconductor Industry Association reports August global chip sales rose 3.2%.
Standard & Poor's announced some changes to its indexes. Lennar (LEN ) will be added to S&P 500 index after the close of trading on Oct. 3, replacing Gillette, which is being acquired. Separately, Lennar raised its annual dividend by 16%.
Beazer Homes (BZH ) will be added to the S&P MidCap 400 after close of trading on Oct. 3, replacing Lennar.
Treasuries yields jumped on the stronger than expected ISM and construction spending data. The long end underperformed on inflation concerns given the sharp increase in the ISM prices paid component, says Action Economics. The yield on the 10-year note climbed to 4.38%.
European stock markets finished higher on Monday amid a round of merger activity. London's Financial Times-Stock Exchange 100 index was up 23.8 points, or 0.43%, at 5,501.5. U.K. pharmacy chain Boots announced a link-up with Europe's Alliance UniChem. NTL paid $6 billion for Telewest Global in the cable/Internet area. Telephonica of Spain is considering a $24 billlion bid for KPN Telecom of the Netherlands.
Germany's DAX index gained 37.95 points, or 0.75%, to 5,082.07. In Paris, the CAC 40 index rose 22.52 points, or 0.49%, to 4,622.54.
Asian markets finished lower on Monday. In Japan, the Nikkei 225 index fell 49.02 points, or 0.36%, to 13,525.28 as the Bank of Japan's quarterly Tankan survey of business sentiment showed weaker-than-expected confidence among large manufacturers. Selling was particularly heavy in shares of companies whose earnings are largely derived from the domestic economy, including retailers banks and brokerages, says says Standard & Poor's MarketScope.
Hong Kong's Hang Seng index lost 34.13 points, or 0.22%, to 15,394.39 on the back of profit taking after gains last week. Some market participants were cautious with markets in Mainland China closed for a week-long holiday, says Standard & Poor's MarketScope.