Dudley expects inflation to "stabilize at 2% in a year or so"
U.S. stock-market indexes fell on Monday, with benchmarks adding to early losses late morning amid 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 73 points, or 0.3%, to 22,277, with Visa Inc. (V) and Microsoft Corp. (MSFT) leading losses, down more than 1.5%.
The tech-centric Nasdaq Composite Index fell 60 points, or 0.9%, to 6,367. Its biggest component by market value Apple Inc. (AAPL) fell 1.1%.
The S&P 500 index was off by about 8 points, or 0.3%, to 2,493, with six of the main 11 sectors trading lower. Tech shares were down 1.6%, leading the losses. Energy shares, meanwhile, following crude-oil prices higher, were trading up 1.1%.
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," and said Pyongyang has the right to shoot down U.S. bombers, according to reports.
The main indexes added to losses immediately after the 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 don't 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 quant 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.
Winer cautioned that selling could intensify.
"If this turns into net outflows instead of just a rotation, it can get ugly pretty quickly," he said.
Investors also focused on looking for more monetary policy clues from the Federal Reserve, which last week announced it will begin to unwind its massive 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 was strengthening across the board. Notably, it was gaining 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 left the way forward for German Chancellor Angela Merkel's conservative alliance in doubt.
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: Monday's lineup includes New York Fed President William Dudley, who spoke and took questions in Syracuse, N.Y.
After that, Chicago Fed President Charles Evans will make a speech on the economy in Grand Rapids, Mich., at 12:40 p.m. Eastern. Later, Minneapolis Fed President Neel Kashkari will have a question-and-answer session at an event in Grand Forks, N.D., at 6:30 p.m. Eastern.
Stocks to watch: Shares of Genuine Parts Co.(GPC) rose 6.8% 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 6.6% after Raymond James analysts downgraded the stock to perform from outperform.
Weighing on the Nasdaq Composite, technology share were hit hard on Monday. Facebook, Inc.(FB) was down 3.7%, while Netflix Inc.(NFLX) fell 3.8%. Shares of Alphabet Inc. (GOOGL) and Amazon.com Inc.(AMZN) also fell about 1.5%.
Other markets: European stocks were logging cautious gains (http://www.marketwatch.com/story/european-stocks-chip-out-small-gain-on-concerns-over-german-election-2017-09-25) amid some concerns over how long 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. Abe said he'll dissolve parliament on Thursday Sept. 28, but gave no date for the election.
Gold prices were slightly lower. 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 11:42 ET (15:42 GMT)