Dudley expects inflation to 'stabilize at 2% in a year or so'
U.S. stock-market indexes ended lower on Monday on the back of a fresh flare up in tensions between the U.S. and North Korea and a sharp decline in technology shares.
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The Dow Jones Industrial Average slipped 53.50 points, or 0.2%, to 22,296.09, with Visa Inc. (V) and Microsoft Corp. (MSFT) leading losses, both down more than 1.7%.
The tech-centric Nasdaq Composite Index fell 56.33 points, or 0.9%, to 6,370.59, representing its sharpest single session slump since Sept. 5. Its largest component by market value, Apple Inc. (AAPL), fell 0.9%, marking the iPhone maker's fourth straight down day.
The S&P 500 index relinquished 5.56 points, or 0.2%, to 2,496.66, with six of the main 11 sectors ending lower. Tech shares fell 1.4%, leading the losses. Energy shares, meanwhile, followed crude-oil prices higher, surging 1.5%.
North Korean foreign minister Ri Yong Ho, speaking in New York on Monday, described President Donald Trump's recent comments about North Korea as "clearly a declaration of war," (http://www.marketwatch.com/story/north-korean-official-says-us-has-declared-war-2017-09-25-13103598) and said Pyongyang has the right to shoot down U.S. bombers.
The main indexes added to losses immediately after the foreign minister's comments.
"Today is mostly about rotation from big-winning tech stocks and into losing energy and retail stocks, which is usually a healthy sign of the bull market," said Michael Antonelli, equity sales trader at Robert W. Baird & Co.
"As we have seen before, any news from North Korea have an instant impact on markets, but usually it does not last," Antonelli said.
Read:A rising share of Wall Street CFOs think this stock market is 'bubblicious' (http://www.marketwatch.com/story/a-rising-share-of-wall-street-cfos-think-this-stock-market-is-bubblicious-2017-09-22)
"We are seeing a big rotation out of big tech stocks and into commodity and retail stocks. Index and [qualitative] funds, which had long positions in large-cap tech stocks are now unwinding and portfolio managers are reducing risk," said Ian Winer, head of the equities division at Wedbush Securities. Quantitative, or quant, funds use mathematical, rules-based trading models to make investing decisions.
Investors also focused on looking for more monetary policy clues from the Federal Reserve, which last week announced it will begin to unwind its more than $4 trillion balance sheet in October.
On Monday, New York Fed President William Dudley (http://www.marketwatch.com/story/feds-dudley-says-import-prices-will-help-boost-inflation-2017-09-25) said firmer import prices as well as the fading effect from a number of "temporary, idiosyncratic" factors will boost inflation over the next year or so and stabilize at around Fed's 2% target. "In response, the Fed will likely continue to remove monetary policy accommodation," Dudley said.
Need to know:'Group stink' is as strong now as it was in 2000 and 2007, says fund manager (http://www.marketwatch.com/story/warning-group-stink-is-as-strong-now-as-it-was-in-2000-and-2007-says-fund-manager-2017-09-25)
At the same time, there are plenty of data releases on tap this week, including durable goods and consumer spending. On Monday, the Chicago Fed national activity index for August dropped to -0.31 from 0.03 in July.
The dollar , meanwhile, initially strengthened, but then lost ground (http://www.marketwatch.com/story/euro-weakens-after-german-election-results-2017-09-25) against haven currencies like the yen after the North Korea comments. Notably, it gained against the euro , which was under pressure after a heavy drop in support for mainstream parties in Germany's general election (http://www.marketwatch.com/story/germanys-anti-immigrant-party-set-to-be-first-in-more-than-50-years-to-enter-parliament-2017-09-24) on Sunday.
See:How Merkel's choice of partner could set the tone for the euro (http://www.marketwatch.com/story/dont-call-the-german-election-boring-it-could-mean-a-huge-shift-for-the-eurozone-2017-09-18)
Fed speakers:Chicago Fed President Charles Evans (http://www.marketwatch.com/story/feds-evans-wont-support-another-rate-hike-until-there-are-clear-signs-of-higher-inflation-2017-09-25) said raising rates, without fresh signs of inflation, could actually delay getting to the price level up to the central bank's 2% target.
Stocks to watch: Shares of Genuine Parts Co.(GPC) rose about 6% after the automotive replacement parts company announced a deal to buy European auto parts (http://www.marketwatch.com/story/genuine-parts-stock-gains-after-deal-2-billion-deal-to-buy-alliance-automotive-2017-09-25) distributor Alliance Automotive Group for $2 billion (http://www.marketwatch.com/story/genuine-parts-stock-gains-after-deal-2-billion-deal-to-buy-alliance-automotive-2017-09-25).
Shares of Quest Diagnostics Inc.(DGX) dropped 7.4% after Raymond James analysts downgraded the stock to perform from outperform.
Weighing on the Nasdaq Composite on Monday were some of the biggest technology companies. Facebook, Inc.(FB) fell 4.5%, while Netflix Inc.(NFLX) declined 4.7%. Shares of Alphabet Inc. (GOOGL) and Amazon.com Inc.(AMZN) also slumped by about 0.8% and 1.6%, respectively.
Other markets: European stocks logged modest gains (http://www.marketwatch.com/story/european-stocks-chip-out-small-gain-on-concerns-over-german-election-2017-09-25) amid some concerns over the length of time it will take for German parties to negotiate a new governing coalition. In Asia, the Nikkei bucked a weaker trend for stocks (http://www.marketwatch.com/story/stocks-in-japan-australia-outpace-lagging-asian-markets-2017-09-24) elsewhere in the region with a 0.5% gain, driven by yen weakness.
Elsewhere in politics, Japan Prime Minister Shinzo Abe on Monday called a snap general election (http://www.marketwatch.com/story/japans-leader-abe-calls-an-early-general-election-2017-09-25)in a bid to consolidate power amid a struggle to resolve a crisis with North Korea, according to media reports.
Gold prices rebounded to finish higher (http://www.marketwatch.com/story/gold-fights-to-shake-off-back-to-back-weekly-declines-2017-09-25)in response to latest threat from North Korea. Brent oil prices rallied amid a growing market consensus (http://www.marketwatch.com/story/brent-oil-rallies-as-hopes-grow-opec-will-extend-output-deal-2017-09-25) that OPEC will likely extend its production-cut deal.
(END) Dow Jones Newswires
September 25, 2017 17:11 ET (21:11 GMT)