Stocks pause from recent surge, hurt by sharp declines in energy, material stocks

Energy, material stocks lead market sell-off

NEW YORK — More dealmaking and a favorable economic forecast weren’t enough to carry stocks higher Monday as markets around the globe cooled from a recent surge.

The Dow Jones industrials and the Standard & Poor’s 500 index lost about 0.6 percent in early trading. The dollar rose, igniting a sharp sell-off in commodities like oil and gold, which weighed on energy and material stocks.

The declines came even as a private sector group’s forecast of economic activity rose for the fifth straight month. The Conference Board’s index of leading economic indicators increased 0.6 percent in August, just short of the 0.7 percent increase economists expected. The index, which is meant to project economic activity in the next three to six months, climbed 0.9 percent in July, revised up from 0.6 percent.

News of Dell Inc.’s plans to buy information technology company Perot Systems Corp. for about $3.9 billion also did little to invigorate investors who have taken stocks up more than 50 percent since early March.

Analysts say breaks in the rally are perfectly healthy.

“This is what should happen, needs to happen, is going to happen along the way but it doesn’t mean we’re headed down significantly from here,” said Jordan Smyth, managing director at Edgemoor Investment Advisors in Bethesda, Md.

The benchmark Standard & Poor’s 500 index tacked on a 2.5 percent gain last week, bringing its total rise since March to 58 percent, after Federal Reserve Chairman Ben Bernanke declared the U.S. recession was “likely over” from a technical standpoint.

Investors are now waiting to see what the rest of the Fed has to say this week during its two-day rate-setting meeting, which begins Tuesday.

In early trading, the Dow Jones industrial average fell 68.70, or 0.7 percent, to 9,751.50. The Standard & Poor’s 500 index lost 7.75, or 0.7 percent, to 1,060.55, while the Nasdaq composite index fell 7.08, or 0.3 percent, to 2,125.78.