If it came from the factory like that it doesn't sound like a headspace problem. Headspace is the distance from the base to a measured spot on the shoulder. If your headspace were off, you wouldn't be able to chamber the 120 grain hornady ammo. Have you checked it with a gauge?
To me, it sounds like your chamber isn't reamed deep enough (perhaps not enough leade or freebore) for the projectile you are using.
Here are a couple of short reads which may help your understanding:
http://www.hornady.com/ballistics-resource/internal
http://en.wikipedia.org/wiki/Headspace_(firearms)
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