Stocks drop as investors await data

NEW YORK — U.S. stocks started the week on a down note, posting a modest decline Monday as home sales fell in the wake of higher mortgage rates and investors nervously awaited more data later in the week and a meeting of Federal Reserve policy makers.

Losses were limited, however, as a round of weekend deal-making fanned hopes for a pickup in merger-and-acquisition activity in the second half of the year, while moving shares of retailer Saks Inc., drug maker Perrigo Co. and advertising firm Omnicom Group Inc.

The Standard & Poor’s 500 Index fell 6.32 points, or 0.4 percent, to settle at 1,685.33, while the Dow Jones industrial average dropped 36.86 points, or 0.2 percent, to end at 15,521.97.

The Nasdaq composite declined 14.02 points, or 0.4 percent, to 3,599.14.

Indexes saw early pressure after the National Association of Realtors said pending home sales fell 0.4 percent in June, with rising rates blamed for undercutting sales momentum.

Still, the Dow and S&P remain camped out just below record highs, while the Nasdaq is near a 13-year high. Overall, market action remains “very healthy and very constructive,” though the market’s reaction to upcoming data will be very telling, Adam Sarhan, chief executive of Sarhan Capital, said in a phone interview.

The Federal Reserve meeting, which concludes Wednesday, is the “wild card” for markets given widely held expectations the policy-setting Federal Open Market Committee won’t make major changes to its policy statement, Sarhan said.

Investors are closely watching the Fed for any further clues as to when it may begin tapering its purchases of government bonds.

Concerns over a slower pace of stimulus was tied to a pullback by stocks last month, though equities soon recovered to see the S&P and Dow head back to record territory.

Meanwhile, it’s a very busy week for economic data. Investors will get their first look at second-quarter gross domestic product on Wednesday.

Economists surveyed by MarketWatch forecast the data to show the economy grew at an annualized rate of just 1 percent after a mediocre 1.8 percent expansion in the first three months of the year.

On Friday, nonfarm payrolls and other labor data are set for release.

Economists surveyed by MarketWatch expect payrolls to grow by 175,000 in July after an expansion of 195,000 in June.

Interest rates have also been in the spotlight. Investors are weighing whether stocks can continue to advance in light of rising bond yields as market participants consider a potential slowing of Fed stimulus efforts.

MacNeil Curry, head of global technical strategy at Bank of America Merrill Lynch, said that while U.S. Treasurys, particularly the 10-year yield, have been a driver of global financial markets, the focus is beginning to shift to Japan’s Nikkei stock average, which is “on the edge of a significant breakdown and resumption of its larger bear trend.”

Japanese stocks ended at their lowest level in more than a month on Monday, with the Nikkei Stock Average falling 3.3 percent to 13,661.13.

Curry is targeting a downside correction for the S&P toward 1,671.