Blue chip stocks edged lower for the second consecutive session amid mixed results from the Black Friday holiday shopping weekend and investors looked ahead cautiously at Friday's jobs report.
The Dow Jones Industrial Average fell 77.6 points, or 0.5%, to end at 16,008.7. On Friday, the Dow fell 11 points, snapping a five-session streak of record-high closes.
The S&P 500 index lost nearly five points, or 0.27% to close at 1,800.9. The Nasdaq Composite Index discarded 14.6 points, or 0.36%, to close at 4,045.26.
Stocks suffered despite a series of reports showing a pickup in manufacturing. In fact, the Institute for Supply Management surprised the market when it said manufacturing activity gained momentum in November. Economists had expected a decline.
On the surface, that's the kind of news that bolsters investor confidence. Instead, it stoked worries that the Federal Reserve will soon begin scaling back its $85 billion-a-month bond-buying program credited with driving the 2013 stock market rally.
Stock investors are looking ahead to Friday for the Labor Department's report on jobs for hints as to whether the stimulus policy is working and when the Fed will taper its bond purchases. Investors have sold on days when they feared a Fed pullback was imminent.
Stocks were also knocked by a series of mixed reports on the Black Friday shopping weekend. Also, the Dow was pulled lower by 3M (MMM), which declined 4.3% to close at $127.68 after the stock was downgraded to “underweight” at Morgan Stanley (see Barron's Take, "3M Stock Vulnerable After Rally, Downgrade," Dec. 2).
In government bond trading, the yield on the 10-year Treasury note rose to 2.8% from 2.746% late Friday. Treasury prices fell, suggesting that bond investors are growing more worried that a withdrawal of Fed stimulus will reduce demand for U.S. debt.
December gold futures shed 2.5% to $1,218.70 an ounce. January crude-oil futures climbed 1.2% to $93.89 a barrel.
In currency markets, the dollar gained against the euro and the yen.
In other corporate news:
Forest Laboratories (FRX) surged 9.7% to close at $56.32, marking the biggest gain in the S&P 500. The drug maker unveiled plans to trim $500 million in costs, and spend at least $400 million buying back its stock.
Dow Chemical (DOW) rose 2.3% to close at almost $40. The company plans to either sell or spin off about its $5 billion commodity chemical business, which includes 40 manufacturing plants.