Rising tensions with Syria outweighed a rally on Wall Street over the weekend to leave the Tel Aviv Stock Exchange lower on Sunday.
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There were other bears stalking the market as well, including the cabinet's vote to increase this year's budget deficit to 4.65% of gross domestic product and Standard & Poor's lowering of Israel's shekel credit rating to A-plus, a decision taken last Thursday after the TASE closed.
The benchmark index of blue-chip stocks fell 0.1% to a close of 1,203 points, while the broader TA-100 lost 0.06% to 1,080.
Turnover was just NIS 568.7 million, a low figure even for a Sunday when no foreign investors are trading.
In what appeared to be the second Israeli attack on Syria since early Friday, large explosions rocked Damascus early Sunday morning. Syria's Information Minister Omran Zoabi said Israeli air strikes against three targets on the outskirts of Damascus "opens the door to all possibilities." Airspace over northern Israel and the Haifa area was closed to civilian flights.
The situation was worrying enough for the market to ignore news from Friday that the U.S. government reported surprisingly strong jobs growth for April, driving American and Europeanstocks to record highs. U.S. nonfarm payrolls rose by 165,000 last month, and the jobless rate fell to a four-year low of 7.5%, the Labor Department said.
Both the S&P 500 and theDow industrial indices topped key milestones for the first time, with the S&P 500 breaking through the 1,600 mark and the Dow briefly surpassing 15,000. In Europe, the FTSEurofirst 300of leading shares rose 1% to 1,218.60, the highest close since June 2008.
The record territory being explored by overseas indices stands in stark contrast to the TA-25, which is up just 1.5% so far in 2013. But Assaf Shaul, deputy CEO for investments at Alfa Platinum Mutual Funds, said on Sunday the outlook for Tel Aviv stocks was good.
"Because of Israeli shares' underperformance compared to the rest of the world since the start of the year, we prefer to give them a bigger weighting. This should be done together with exposure to U.S. stocks," he said, recommending a portfolio of 60% TA-25 and TA-75 shares, split equally, with another 10% going to mid-caps and the remainder to NASDAQ shares.
Mid-cap shares have been the star performer on the TASE so far this year, with the TA-Midcap 50 rising 1.1% Sunday and 18.2% year to date.
The dollar rose 1.1% against the yen Friday, to 99.03 yen, on pace for its biggest one-day rise in two weeks, while the euro rebounded. None of that, however, was enough to change their direction vis-a-vis the shekel Friday. The U.S. currency slipped 0.1% to a Bank of Israel rate of NIS 3.5690, while the euro tumbled 0.7% to NIS 4.6730.
Leading the TASE down Sunday was Compugen, which fell 3.4%. Babylon, the online translation company, dropped 3%, and Lev Leviev's Africa Israel investments lost 2.9% as did its Africa Properties unit.
Allot Communications led Sunday's gainers among TA-100 stocks, advancing 4.1% to catch up with a sharp gain it posted Friday on Wall Street. Allot's rival maker of provider of intelligent broadband solutions, Procera Networks, posted first-quarter revenue that beat analyst estimates and raised its revenue guidance for 2013.Aloni Hetz jumped 3.1% after it said over the weekend that it is investing $300 million the U.S. real estate fund Carr Properties.
With reporting by Reuters.