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U.S. stocks slipped at the start of the fourth quarter, following their best three-month stretch of the year.
Utilities and other stocks that have been popular in 2016 in part because of their dividends were among Monday’s biggest decliners. Such stocks have rallied as interest rates stay low, but many investors now expect the Federal Reserve to raise rates by year-end.
The Dow Jones Industrial Average declined 54.30 points, or 0.3%, to 18253.85. The S&P 500 fell 7.07 points, or 0.3%, to 2161.20 and the Nasdaq Composite dropped 11.13 points, or 0.2%, to 5300.87.
Major U.S. indexes notched their biggest quarterly gains of the year on Friday.
“The markets were a little quieter” after the end-of-quarter rush to buy, said John Brady, managing director at brokerage R.J. O’Brien.
Monday’s U.S. stock-trading volume was below the daily average for 2016.
The utilities sector of the S&P 500 lost 1.3% after falling 6.7% in the third quarter—its biggest quarterly drop since 2009. Utilities are still up 12% this year. Real-estate shares fell 1.8% Monday.
The S&P High Yield Dividend Aristocrats index, which includes companies in the S&P Composite 1500 that have raised their dividends for at least 20 consecutive years, fell 0.6%.
“The possibility of raising rates pulls out some of the air from the yield alternatives,” said Jamie Cox, managing director at Harris Financial Group.
On Monday, data showed U.S. factory activity rebounded in September. The Institute for Supply Management said its manufacturing index increased last month, after showing a contraction in August.
ENLARGE
A London trading desk. European stocks started the quarter little changed but London’s FTSE 100 rose 1.2% as investors focused on the health of the region’s banking sector and Britain’s plans to exit from the EU.
Photo:
Luke MacGregor/REUTERS
U.S. government bonds fell, with the yield on the 10-year Treasury note rising to 1.624%, from 1.605% Friday.
The WSJ Dollar Index, which measures the U.S. currency against 16 others, rose 0.2%.
Energy shares slipped even as U.S. crude oil extended its rally, increasing 1.2% to $48.81 a barrel. Oil prices are at their highest level since July 1, having risen more than 9% over the past four sessions on the prospect of reduced output from the Organization of the Petroleum Exporting Countries. OPEC members reached a tentative agreement in Algeria last week.
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The Stoxx Europe 600 increased 0.1%.
SPX Leaders and Laggards - 1 Day
Shares in Asia mostly advanced on Monday, catching up with Friday’s late gains in Europe and on Wall Street. Japan’s Nikkei Stock Average rose 0.9%, while shares in Hong Kong added 1.2%.
Markets in China and Germany were closed for holidays.
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Third-Quarter Markets Review
- Jittery Investors Are Pulling Back
- Why the Bond Bulls Will Keep Running
- Stock Investors Rediscover Taste for Risk
- The Quarter’s Best and Worst Performers
- Third Quarter: Full Market Data
Write to Daniel Huang at dan.huang@wsj.com and Riva Gold at riva.gold@wsj.com
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