Markets retreat after September rally

Stocks fell Monday, taking a pause from their September rally.

In Toronto, the S&P/TSX composite index closed down 40.1 points, or 0.3 per cent, to 12,322.9.

New York's Dow Jones industrial average was down 78.41 points, or 0.7 per cent, to 10,751.27.

The Nasdaq composite index shed 26.23 points, or 1.1 per cent, to 2,344.52 after investment bank Goldman Sachs cut its rating of computer giant Microsoft.

The S&P 500 fell 9.21, or 0.8 per cent, to 1,137.03.

Analysts say the market was due for a pullback following a 10.4 per cent gain in the Dow in September.

The month-long rally came on relatively low volume, a sign that many investors are still waiting on the sidelines.

Doug Roberts, chief investment strategist at Channel Capital Research, said the market has been trading in a broad range over the past six months. With it approaching the high end of that range, a pullback is natural.

The market has been "alternating between euphoria and despair," Roberts said of the wide trading range dating back to late April, when stocks hit their high for the year.

The Canadian dollar slipped 14-100ths of a cent to 97.85 cents US.

October bullion stepped back 70 cents to $1,315.40 US an ounce.

Oil rallied to highest level in two months during the session. The November contract hit $82.38 US a barrel, but finished the day at $81.47, down 11 cents.

Still, analysts said weak energy demand likely will push prices lower over the last three months of the year.

"We have our doubts, however, that prices will be able to maintain these advances going into October, as the sector's fundamentals still do not look that inspiring, while the end of the hurricane season has yet to be fully discounted," said a report from MF Global in New York.

"Inventory levels also remain quite high while U.S. energy demand … remains sluggish."

The market decline came as new data showed U.S. factory orders fell 0.5 per cent in August largely because of plummeting aircraft orders.

That was slightly above expectations but excluding the volatile aircraft sector, orders rose a solid 0.9 per cent.

Meanwhile, the number of buyers who signed contracts to purchase homes in August crept higher, but remains at very weak levels.

Markets await jobs numbers

Traders are waiting for employment data for the U.S. and Canada, which comes out Friday.

U.S. expectations are modest, with economists predicting that only 5,000 jobs were created during September with the jobless rate edging up a one-10th of a point to 9.7 per cent.

"Everybody knows the job market has been weak and everybody knows it stayed weak so if anybody thinks the job report is going to be extraordinarily strong, they're not on this planet," said Kate Warne, Canadian markets specialist at Edward Jones in St. Louis.

"After strong moves, we typically see markets pause and this week in particular with the start of U.S. earnings later in the week as well as the employment report, there is a lot of reason for people to just wait and see for a bit as opposed to taking strong positions today."

In Canada, economists forecast that the economy created about 10,000 jobs last month.