MARKET REPORT

Stocks fall before Fed meeting

NEW YORK - Stocks edged lower Monday as investors waited for a series of major economic reports due this week, and a string of merger deals wasn’t enough to push indexes higher.

On Wednesday, the government will report its first estimate of U.S. economic growth for the second quarter, and on Friday it will publish its monthly jobs survey.

Both reports will give investors a better idea about the strength of the economy and what’s next for the Federal Reserve’s stimulus program. Investors will hear from the Fed on Wednesday after the central bank winds up a two day policy meeting. The Fed’s stimulus has been a major factor supporting a four-year rally in stocks.

The Standard & Poor’s 500 index dropped 6.32 points, or 0.4 percent, to 1,685.33. The Dow Jones industrial average fell 36.86 points, or 0.2 percent, to 15,521.97. The Nasdaq composite dropped 14.02 points, or 0.4 percent, to 3,599.14.

Two stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume was light at 2.7 billion shares.

Seven of the 10 sectors in the S&P index fell. The declines were led by energy companies and banks.

The benchmark S&P 500 index is still up 4.9 percent in July and is on track to have its best month since January. The index jumped this month, climbing to an all-time high July 22, after Fed Chairman Ben Bernanke assured investors that the central bank wouldn’t cut its stimulus before the economy was ready. The Fed is buying $85 billion in bonds a month to help keep interest rates low and encourage borrowing and hiring.

Stocks might struggle to add to their gains, given that expectations for the economy remain modest, said Scott Wren, a senior equity strategist at Wells Fargo Advisors.

The U.S. economy is forecast to have grown just 0.5 percent in the second quarter, according to data provider FactSet. That would be slower than the 1.8 percent annual rate at which the economy expanded in the first three months of the year.

“I don’t think you’re going to see the market sustain much higher levels than this,” said Wren. “All this data is going to show that we are slowly improving, but it’s a slow process and there’s not much to get excited about.”

A trio of corporate deals caught investors’ attention Monday but failed to ignite the broader market.

Saks stocks jumped after Canadian retailer Hudson’s Bay, the parent company of Lord & Taylor, agreed to buy the luxury store operator for $2.4 billion, or $16 a share.

Interpublic Group, an advertising company, gained after Omnicom Group, another big advertiser, agreed to combine with France’s Publicis Groupe to create the world’s largest advertising company. Interpublic rose 74 cents, or 4.7 percent, to $16.61. The deal was announced Sunday.

Perrigo also featured in the mergers-and-acquisitions news. The drugmaker agreed to buy Ireland’s Elan for $8.6 billion.

The deals should be positive for the stock market in the long run and should be followed by more merger activity, said Dan Veru, chief investment officer at Palisade Capital Management. Companies are sitting on record cash balances and borrowing costs, though rising, are still close to record lows.

“Companies are struggling to grow organically,” said Veru. “So, how do they grow? They grow by buying other businesses.”

Business, Pages 22 on 07/30/2013

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