Wall Street starts key week with a dip

By Rodrigo Campos

NEW YORK (Reuters) - U.S. stocks dipped on Monday as a week packed with data and central bank meetings got under way, with the S&P 500 within a few points of its record close set a week ago.

The main investor focus is Wednesday's statement from the U.S. Federal Reserve, which will be combed for clues on when the Fed will begin to pare its $85 billion in monthly asset purchases. The Fed is most likely to begin tapering its stimulus in September, according to a Reuters poll of economists conducted on July 22.

Until recently, investors have embraced average or weak data with the expectation that the Fed will continue to stimulate the economy and put a floor on stock prices. However, the prospect of a slightly less accommodative Fed in the near future has increased the market's need for a stronger economy.

Contracts to purchase previously owned U.S. homes fell in June, retreating from a more than six-year high touched in May, suggesting rising mortgage rates were starting to dampen home sales.

Data on the housing and industrial sectors are scheduled in the first half of the week, followed by gross domestic product for the second quarter on Wednesday and the key payrolls report on Friday.

"The focus right now is the Fed meeting and then the employment numbers at the end of the week," said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

He said investors will try to decipher what the Fed knows about the jobs report a couple of days in advance, which could make Wednesday "even more volatile than it usually is" on Fed statement days.

The Dow Jones industrial average fell 39.54 points or 0.25 percent, to 15,519.29, the S&P 500 lost 4.67 points or 0.28 percent, to 1,686.98 and the Nasdaq Composite dropped 3.58 points or 0.1 percent, to 3,609.59.

On the earnings front, hotel, energy and financial services conglomerate Loews Corp posted a jump in second-quarter profit as revenue from its insurance arm, CNA Financial , increased nearly 13 percent.

"Earnings have been good so far, but they have come in low-quality," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. "We haven't really seen margin expansion or a lot of revenue growth and that can keep a lid on the markets in the short term."

Halfway through earnings season, 67.6 percent of S&P 500 companies have beaten analysts' expectations - in line with the 67 percent average beat in the last four quarters. About 56 percent of the companies have beaten revenue expectations, more than the 48 percent of revenue beats in the past four earnings seasons but below the historical average.

Merger activity could give equities support as big deals show that large investors see value in the market.

On Monday, U.S. drugmaker Perrigo agreed to buy Irish drug company Elan for $8.6 billion. U.S.-traded Elan shares rose 5.2 percent to $15.71.

Shares in advertising groups jumped after Publicis and Omnicom said they would merge, as investors bet the deal would create an opening for rivals to poach defecting clients and potentially trigger more deals.

Omnicom shares gained 6.6 percent to $69.43 and smaller rival Interpublic Group gained 7.1 percent to $17.

"Deals are getting done because there's still cheap money," said Fort Pitt's Forrest. "It makes you wonder if the threat of higher interest rates is making these deals get done now."

Hudson's Bay Co , operator of department store chains Lord & Taylor in the United States and The Bay in Canada, said it would buy luxury retailer Saks Inc for $16 per share. Saks shares rose 3.7 percent to $15.88.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry and Nick Zieminski)