Stocks retreated from their record highs Monday as investors looked ahead to a frenetic week.
Investors are waiting to learn who President Trump wants as the next head of the Federal Reserve, what several of the world's biggest central banks will decide on interest rates, and whether Apple and other big U.S. companies can keep piling their profits higher. In the meantime, reports continued to show that the economy is strengthening, and negotiations continued in Washington to cut income-tax rates.
The Standard & Poor's 500 index fell to 2,572.83 points, down 8.24, or 0.3%, from the record it set Friday. Losses for healthcare stocks, telecoms and other areas of the market overshadowed gains for technology companies and energy producers.
The Dow Jones industrial average fell 85.45 points, or 0.4%, to 23,348.74, and the Nasdaq composite slipped 2.30 points, or less than 0.1%, to 6,698.96. Smaller companies’ stocks fell more than the rest of the market, and the small-cap Russell 2000 index dropped 17.42 points, or 1.2%, to 1,490.90.
Investors expect Trump to announce his choice for the next chair of the Federal Reserve by the end of the week. The central bank has played a pivotal role in the economy's recovery from the Great Recession and the stock market's leap to record after record. Jerome “Jay” Powell, a member of the Federal Reserve's board, is Trump's leading candidate to succeed Janet L. Yellen as the head of the nation's central bank, with an announcement planned for Thursday, according to senior administration officials.
The choice could have far-ranging effects on the markets, particularly if the new chair advocates a more aggressive policy in raising interest rates than Yellen has. Low interest rates have helped push returns higher for bond funds, stocks and other investments around the world. But pressure may be rising for the Fed to increase rates more quickly.
A report Monday showed that U.S. consumer-spending growth accelerated last month, led by an uptick in auto sales. It's the latest piece of evidence that the economy is picking up momentum.
On Friday, the week's leading economic report is expected to show that job growth continues to be strong and that the unemployment rate remained at a 16-year low.
Against the backdrop of an economy that's growing at a 3% annual rate, all those ingredients could lead to higher inflation, which has been scarce in the global economy for years, said Jim Paulsen, chief investment strategist of the Leuthold Group. That could cause the Fed to push interest rates higher more quickly.
“We've rarely had 3% back-to-back quarters of growth in this recovery, and we have never had that when we've been at 4% unemployment,” he said.
The Federal Reserve is scheduled to start a two-day meeting Tuesday. Most investors expect the Fed to raise rates in December, which would be the third increase of the year.
Other central banks meeting this week include the Bank of Japan and the Bank of England.
Investors are also waiting to see what progress can be made in Washington on revamping the nation's tax system. Stocks have climbed in recent weeks in part on rising expectations that companies could enjoy lower tax bills and bigger profits. But tax changes still face resistance on Capitol Hill, as Congress looks for ways to raise revenue so the deficit doesn't leap higher.
Also this week, more than 100 companies in the S&P 500 index will report their earnings results for the July-through-September quarter. Strong earnings growth has helped to drive the stock market higher, and tech stocks have been delivering some of the most consistent growth. They'll probably need to keep doing so to justify their lofty stock prices. Tech giant Apple will report its results Thursday.
Merck dropped 6.1% to $54.71 on Monday — one of the biggest losses in the S&P 500 — after it withdrew an application to market its Keytruda cancer drug in Europe.
Telecom stocks were also weak. Sprint dived 9.3% to $6.34 and T-Mobile US sank 5.4% to $59.58 after a report from Nikkei in Japan said that Sprint's majority owner, Softbank, wants merger negotiations between the companies called off.
Mattel leaped 11.3% to $15.58 on speculation that, after reporting dismal quarterly earnings last week, the toymaker might be sold or broken up.
Advanced Accelerator Applications soared 10.4% to $80.50 after the French radiopharmaceutical company agreed to be bought by Swiss drugmaker Novartis for $82 per U.S.-traded share.
Strayer Education jumped 9% to $100 after the for-profit education company said it is buying Capella Education for about $1.9 billion in stock.
Iconix Brand Group plummeted 62.3% to $1.85 after the clothing brand licensing company said Wal-Mart won't renew a deal.
Cooper Tire & Rubber dropped 9.9% to $32.20 after the company posted disappointing third-quarter sales and cut its profit margin forecast.
In the commodities market, benchmark U.S. crude rose 25 cents to $54.15 a barrel. Brent crude, the international standard, rose 46 cents to $60.90 a barrel.
Natural gas was close to flat at $2.97 per 1,000 cubic feet, heating oil rose a penny to $1.88 a gallon and wholesale gasoline was close to flat at $1.76 a gallon.
Gold rose $5.90 to $1,277.70 an ounce. Silver rose 10 cents to $16.85 an ounce. Copper rose a penny to $3.11 a pound.
The dollar fell to 113.18 yen from 113.81 yen. The euro rose to $1.1637 from $1.1599. The British pound rose to $1.3199 from $1.3125.
Bond yields fell as prices for Treasurys rose. The yield on the 10-year Treasury note fell to 2.36%. The two-year yield fell to 1.57% from 1.60%, and the 30-year yield fell to 2.88% from 2.92%.
In overseas stock markets, the French CAC 40 was close to flat, Germany's DAX rose 0.1% and the FTSE 100 in London slipped 0.2%. Japan's Nikkei 225 index was virtually flat, South Korea's Kospi rose 0.2% and the Hang Seng in Hong Kong lost 0.4%.