ITW Illinois Tool Works Inc

By Christopher Whittall 

U.S. stocks slipped Monday, retreating further from their all-time highs, as tensions over the U.S. and China's trade fight stoked cautiousness among investors.

The Dow Jones Industrial Average fell 139 points, or 0.4%, to 26603. The S&P 500 dropped 0.5% and the Nasdaq Composite lost 0.4%.

Major indexes began the week on a downbeat note after China pulled out of trade talks with the U.S., suggesting a resolution to the two countries' trade conflict could be a way off.

Shares of industrial companies, which many analysts have said are particularly vulnerable to tariffs, were among the biggest decliners in the S&P 500. Aerospace-parts maker Arconic lost 2.6%, while Illinois Tool Works fell 1.8% and tool manufacturer Stanley Black & Decker shed 2.1%.

The losses offset a rally in the S&P 500 energy sector, which headed for its biggest one-day gain since July. The sector rose 1.1% after a Sunday meeting of oil-producing countries failed to produce a consensus on how to contain prices. U.S. crude oil rose 1.9% to $72.11 a barrel.

Despite an uptick in volatility in recent weeks, many investors are continuing to bet stocks will be able to keep nudging higher. Economic data have pointed to strength in the U.S. labor market and sustained growth in corporate earnings. Some investors are also holding out hope that the back-and-forth between the U.S. and China will eventually give way to a trade deal.

Fabrizio Quirighetti, co-head of multiasset investments at SYZ Asset Management, is looking through the near-term headlines in the belief that the U.S. and China will reach an agreement after the midterm elections in November.

Having favored U.S. stocks over the summer, he is now buying equities in other regions including Europe, where he thinks growth is firming after a slowdown earlier in 2018.

"We have become more constructive on the rest of the world," said Mr. Quirighetti.

Elsewhere, the Stoxx Europe 600 slipped 0.6% as declines in shares of automakers and construction firms offset a rally in the energy sector.

Mergers and acquisitions also drove European markets, with shares in Sky rising nearly 9% after Comcast outbid 21st Century Fox to buy the European pay-TV giant. In the U.S., Comcast shares fell 8%.

Randgold Resources jumped 5.7% on news that Barrick Gold had agreed to buy the company in an all-share merger that would create the world's largest gold miner.

In Asia, there were signs of last week's positive momentum reversing, though many markets were closed for holidays.

Hong Kong's Hang Seng Index slumped 1.6% after rising 2.4% last week. Australia's S&P/ASX 200 declined 0.1%.

Investors' attention will return to central banks this week, with the Federal Reserve due to release its policy statement Wednesday. The Fed is on track to raise interest rates amid solid U.S. growth, while investors will look for clues on the path of rate increases in 2019.

"We don't think there'll be a dovish surprise coming out of the meeting, " said Ian Samson, markets research analyst at Fidelity International.

Write to Christopher Whittall at christopher.whittall@wsj.com

(END) Dow Jones Newswires

September 24, 2018 11:14 ET (15:14 GMT)

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