US stocks drop on Fed taper talk

NEW YORK (AFP) - US stocks ended mostly lower on Monday on fairly quiet trading during which some investors fretted about the possible pullback of the Federal Reserve's aggressive bond-buying programme.

The Dow Jones Industrial Average was down 46.23 (0.30 per cent) at 15,612.13.

The broad-based S&P 500 dropped 2.53 (0.15 per cent) to 1,707.14, while the tech-rich Nasdaq Composite Index added 3.36 (0.09 per cent) at 3,692.95.

The US growth outlook appeared firmer as the Institute for Supply Management's July purchasing managers index for the services sector showed a healthy jump in activity.

That raised some concerns that the Federal Reserve might taper its bond-buying programme "sooner rather than later," said Mr Alan Skrainka, chief investment officer at Cornerstone Wealth Management.

Monday's trade was "just a modest pullback," Mr Skrainka added.

Some investors also looked at comments from Federal Reserve Bank of Texas President Richard Fisher that advocated a quick tapering.

"Anytime there is Fed chatter, there is an impact on the market," said Mr Michael James, managing director of equity trading at Webush Securities, adding that the market could easily reverse itself on Tuesday.

Apple rose 1.5 per cent after the Obama administration overturned an International Trade Commission ban on some of the tech giant's products, stepping into a long-running patent dispute between Samsung and Apple.

Meat processor and marketer Tyson Foods rose 4.1 per cent after earnings bested analyst estimates by 9 cents at 69 cents a share. The company also signaled that 2013 revenues would be above market expectations.

Semiconductor and wireless technology producer Qualcomm slipped 0.8 per cent after Piper Jaffray cut its rating on the firm on concerns about softening high-end smartphone demand.

Industrial and construction tool supplier Fastenal dropped 1.9 per cent after monthly sales showed an increase of 2.9 per cent in July compared with last year, below the 5 per cent expected, according to a Credit Suisse note.

Bond prices fell. The yield on the 10-year US Treasury rose to 2.64 per cent from 2.60 per cent last Friday, while the 30-year increased to 3.73 per cent from 3.69 per cent. Bond prices and yields move inversely.