By Caroline Valetkevitch
NEW YORK (Reuters) - U.S. stocks fell on Monday as Apple shares dropped following a broker downgrade and investors continued to weigh chances of an aggressive interest rate cut by the Federal Reserve later this month.
Apple Inc <AAPL.O> fell 2.2% and was the biggest drag on the S&P 500 and Nasdaq. Rosenblatt Securities downgraded the iPhone maker's shares to "sell" from "neutral," and said it expected the company to face "fundamental deterioration" in the next six to 12 months.
The technology <.SPLRCT> index was down 0.7%, while the healthcare index <.SPXHC> fell 0.8%, weighed down by U.S. President Donald Trump's recent statement about an upcoming executive order that would lower prescription drug prices.
Surprisingly strong U.S. jobs data on Friday has forced traders to temper hopes of a sharp rate cut at the central bank's July 30-31 policy meeting, even as a reduction is still expected.
"People are facing further confusion over the number of interest rate decreases we're likely to have going forward due mainly to the strong job numbers Friday, and reacting with a mildly down day in the market," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.
"Expectations about the number and timing of rate cuts have changed slightly."The Dow Jones Industrial Average <.DJI> fell 115.98 points, or 0.43%, to 26,806.14, the S&P 500 <.SPX> lost 14.46 points, or 0.48%, to 2,975.95 and the Nasdaq Composite <.IXIC> dropped 63.41 points, or 0.78%, to 8,098.38.
A week ago, the market forecast an 80.1% chance of a 25-basis-point cut, and a 19.9% chance of a 50-basis-point cut, according to CME Group's FedWatch tool. In afternoon trade, the chances were 92% and 8%, respectively.
Investors might get an opportunity to gauge near-term monetary policy thinking during Fed Chairman Jerome Powell's semi-annual testimony to the U.S. Congress on July 10-11. Also ahead are the central bank's June meeting minutes, scheduled for release on Wednesday.
Market watchers are also likely to focus on the start of the second-quarter earnings season next week. Profits for S&P 500 companies are expected to have dipped 0.1% from a year ago, according to Refinitiv IBES data.
"People are trying to game how bad second-quarter earnings and guidance are going to be," Tuz said. "People are expecting a weak second quarter, but it's hard to determine how weak and what kind of guidance about third and fourth quarters will go along with that."
Boeing Co <BA.N> fell 1.3% and was the biggest drag on the Dow after Saudi Arabian budget airline flyadeal said it would not proceed with a provisional $5.9 billion order for the planemaker's grounded 737 MAX aircraft, instead opting for a fleet of Airbus A320 jets.
Symantec Corp <SYMC.O> rose 2.4% after Jefferies said the cybersecurity firm is a "logical financial acquisition" amid reports Broadcom Inc <AVGO.O> is in advanced talks for a deal.
Declining issues outnumbered advancing ones on the NYSE by a 1.77-to-1 ratio; on Nasdaq, a 2.30-to-1 ratio favored decliners.
The S&P 500 posted 20 new 52-week highs and no new lows; the Nasdaq Composite recorded 42 new highs and 50 new lows.
Volume on U.S. exchanges was 5.74 billion shares, compared to the 6.77 billion average for the full session over the last 20 trading days.
(Additional reporting by Medha Singh and Uday Sampath in Bengaluru; Editing by Tom Brown and Susan Thomas)