* New York state manufacturing index at 3-1/2 year low
* Apple shares hit new high
* Lowe’s withdraws Rona offer
* Dow off 0.2 pct, S&P 500 off 0.2 pct, Nasdaq off 0.2 pct
By Chuck Mikolajczak
NEW YORK, Sept 17 (Reuters) - U.S. stocks eased on Monday after a rally that drove the S&P 500 index to its highest level in nearly five years and investors focused on signs of weak growth and Middle East turbulence.
Stocks rode a four-day streak last week to a 1.9 percent gain, getting a charge from the Federal Reserve’s new stimulus measures that could keep equities buoyed for months. The Fed’s action followed a decision by the European Central Bank to support debt-ridden euro-zone nations by purchasing their debt.
“Everyone is still reeling from last week - that is part of it,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
“But on the other hand, it starts to become increasingly more difficult to pull the trigger on buy orders at these valuations.”
With central banks appearing ready to make every effort to support markets, investors turned their attention to other possible headwinds, including the economy and geopolitical risks.
“The market is certainly going to start to focus on some of this geopolitical stuff that is happening over in Iran and the Middle East because there is nothing else to focus on,” said Ken Polcari, managing director at ICAP Equities in New York.
“Between the Fed and the ECB throwing all this money out there, (investors) don’t have to worry about the market falling out of bed,” Polcari added. “They can concentrate on other parts of what else is going on in the world.”
Protesters in Afghanistan and Indonesia burnt U.S. flags and chanted “Death to America” on Monday in renewed demonstrations over a film mocking the Prophet Mohammad.
Israeli Prime Minister Benjamin Netanyahu warned that Iran would reach the brink of being able to build a nuclear bomb in just six or seven months.
Factory activity in New York state contracted for a second month in a row in September, falling to its lowest level in nearly 3-1/2 years, according to a report on Monday from the Federal Reserve Bank of New York. A national manufacturing survey by an industry group earlier this month showed the sector contracted for a third month in August.
The Dow Jones industrial average dropped 32.18 points, or 0.24 percent, to 13,561.19. The Standard & Poor’s 500 Index lost 2.62 points, or 0.18 percent, to 1,463.15. The Nasdaq Composite Index fell 7.76 points, or 0.24 percent, to 3,176.19.
Major Japanese companies, including Nissan and Honda, announced factory shutdowns in China on Monday and Japanese expatriates were urged to stay indoors ahead of what could be more angry protests over a territorial dispute between Asia’s two biggest economies.
Lowe’s Cos Inc said it had withdrawn its C$1.8 billion ($1.86 billion) proposal to buy Rona Inc in the face of stiff opposition to the unsolicited bid for the Canadian home improvement retailer. Lowe’s shares edged up 0.14 percent to $29.44.
Apple Inc shares hit another all-time high of $699.54 with demand for its new iPhone 5 exceeding initial supply as the company booked 2 million orders in one day and pushed the delivery date for some pre-orders to next month. At midday in New York, Apple shares rose 1.1 percent to $698.63.
General Electric Co has hired Morgan Stanley to review its 33 percent stake in Thailand’s Bank of Ayudhya Pcl, which could potentially lead to a sale by the U.S. conglomerate of its near $2.2 billion holding, sources familiar with the matter said. GE shares shed 0.5 percent to $22.01.
Tyco International Ltd added 0.6 percent to $55.55 after the company said shareholders have approved a breakup of the industrial conglomerate into three pieces.
Industrial and medical conglomerate Danaher Corp said on Monday it will buy diagnostics company IRIS International Inc for $355 million. Iris’ shares jumped 45.2 percent to $19.48 while Danaher’s stock advanced 0.35 percent to $54.95.