US STOCKS-Wall St dips on caution before Fed debates stimulus policy
* Investors turn focus to data, signals from Fed on stimulus
* Drug firm Perrigo to buy Elan; Publicis, Omnicom in merger
* U.S. pending home sales pull back in June as rates rise
* Dow off 0.1 pct, S&P down 0.2 pct, Nasdaq off 0.2 pct
NEW YORK, July 29 (Reuters) - U.S. stocks dipped on Monday as investors took a cautious stance before a U.S. Federal Reserve meeting this week that could signal when the Fed might begin to alter its stimulus plans.
The energy sector led the day's losses, with the S&P energy index down 0.9 percent, while Caterpillar was up 0.9 percent at $82.82 and gave the Dow its biggest boost after announcing a $1 billion accelerated stock repurchase program.
The Fed's statement, which is due on Wednesday at the end of a two-day meeting of the Fed's Open Market Committee, will be scrutinized for hints on when the central bank may begin to scale back its massive bond-buying aimed at stimulating the economy and known as quantitative easing.
"There's a concern that whatever the FOMC says or does will lead to a dramatic reaction in the market, much like we saw in June," said Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco.
The Dow Jones industrial average was down 22.47 points, or 0.14 percent, at 15,536.36. The Standard & Poor's 500 Index was down 3.84 points, or 0.23 percent, at 1,687.81. The Nasdaq Composite Index was down 6.24 points, or 0.17 percent, at 3,606.92.
September is the most likely time for the Fed to begin paring its $85 billion in monthly bond purchases, according to a July 22 Reuters poll of economists.
In addition, a data-packed week that includes July's payrolls report on Friday could sway the market.
Until recently, investors have interpreted average or weak economic data as a sign 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 meant signs of a stronger economy have become more important to the market.
Contracts to purchase previously owned U.S. homes fell in June, retreating from a more than six-year high touched in May as rising mortgage rates were starting to dampen home sales.
In earnings news, Loews Corp, the hotel, energy and financial services conglomerate, posted a jump in second-quarter profit as revenue from its insurance arm, CNA Financial, increased nearly 13 percent. Shares of Loews edged down 0.04 percent to $46.03.
Halfway through earnings season, 67.2 percent of S&P 500 companies have beaten analysts' expectations - in line with the 67 percent average beat over 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.
"It's interesting to me that you've got deal activity this time of the year because normally this is the time of the year when the markets are quite quiet," said Dan Veru, chief investment officer of Palisade Capital Management in Fort Lee, New Jersey, which manages about $4.5 billion in assets.
"To have mergers going on now probably bodes well that the fall is going to be a very active period."
On Monday, U.S. drugmaker Perrigo agreed to buy Irish drug company Elan for $8.6 billion. U.S.-traded Elan shares rose 4.2 percent to $15.56. Perrigo was the S&P 500's worst performer after the news, shedding 6 percent to $126.12.
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 3.9 percent to $15.92.
Shares in advertising groups jumped after Publicis and Omnicom said they would merge. Investors bet the deal would create an opening for rivals to poach defecting clients and potentially trigger more deals.
Omnicom shares were down 0.4 percent to $64.71 while smaller rival Interpublic Group gained 4.9 percent to $16.65.