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An early stock market rally fades on Syria

In this Tuesday, Aug. 27, 2013 photo, Luigi Muccitelli, center, works with fellow traders on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

NEW YORK (AP) — The prospect of U.S. military action in Syria was again the focus for Wall Street on Tuesday.

Stocks surged in the opening minutes of trading as worries of an imminent attack on Syria appeared slimmer after President Barack Obama announced over the weekend that he would seek congressional approval for a strike.

The rally faded after the top Republican in Congress said he would support President Obama's call for the U.S. to take action.

Speaking in the late morning, House of Representatives Speaker John Boehner said the use of chemical weapons must be responded to.

"Key Republicans seem to agree with Obama on Syria," said JJ Kinahan, chief derivatives strategist for TD Ameritrade. "It puts us in a difficult situation as to what might happen from here."

The Dow Jones industrial average was down 25 points, or 0.2 percent, to 14,785 as of 1:20 p.m. Eastern Daylight Time. The Dow was dragged lower by Microsoft and Verizon.

The Standard & Poor's 500 index gained two points, or 0.1 percent, to 1,635. The Nasdaq composite climbed 14 points, or 0.4 percent, to 3,604.

The stock market also got an early boost from a report showing that U.S. manufacturing expanded last month at the fastest pace since June 2011.

Stock indexes rose sharply when the market opened. The Dow rose as much 123 points, while the Standard & Poor's 500 index climbed 18 points.

In corporate news, CBS surged $2.34, or 4.6 percent, to $53.44 after the broadcaster and Time Warner Cable reached an agreement that ended a blackout of CBS and CBS-owned channels such as Showtime on the cable provider.

Microsoft fell $2.07, or 6 percent, to $31.36 after the software company said it would pay $7.2 billion to acquire Nokia's smartphone business and a portfolio of patents and services. Microsoft is to capture a slice of the lucrative mobile computing market that is currently dominated by Apple and Google.

In other deal news, Verizon fell $1.37, or 3 percent, to $46 after the company agreed to pay $130 billion for the 45 percent stake in Verizon Wireless owned by British cellphone carrier Vodafone.

Stocks may struggle to rally in September, said Randy Frederick, managing director of active trading and derivatives at the Schwab Center for Financial Research.

The S&P 500 logged its worst month in over a year in August as investors fretted about when the Federal Reserve will cut its economic stimulus. The Fed's September meeting is when many on Wall Street think the central bank will begin winding down its massive bond-buying program.

Lawmakers in Washington may also throw investors a curve ball.

To keep the government running, Congress needs to pass a short-term spending bill before the fiscal year starts Oct. 1. Then there's the government's $16.7 trillion borrowing limit. Treasury Secretary Jacob Lew warned that, unless it's raised soon, the government would lose the ability to pay all of its bills by the middle of October.

Political wrangling in Washington shook financial markets in August 2011, when lawmakers fought over raising the debt ceiling. That led the rating agency Standard & Poor's to strip the U.S. of its triple-A credit rating.

"All these catalysts out there ... are still there," said Frederick. "There's just not enough upside catalysts, and there's plenty of downside catalysts."

September has often been a losing month for the stock market. Since 1945, the S&P 500 index has slumped nearly six out of every 10 Septembers, with an average loss of 0.6 percent.

In government bond trading, the yield on the 10-year Treasury note climbed to 2.86 percent from 2.79 percent Friday. U.S. markets were closed Monday for Labor Day.

In commodities trading, the price of oil rose 74 cents, or 0.7 percent, to $108.38. The price of gold rose $15.70, or 1.1 percent, $1,412.