U.S. stocks lost momentum to finish mostly lower Monday as crude-oil futures returned to bear-market territory and weaker-than-expected manufacturing data raised doubts about the strength of the economy.
“The path of least resistance in the short term seems to be for stocks to go higher, but to do so sustainably we need to see much stronger economic growth and positive earnings growth,” said Eric Wiegand, senior portfolio manager at U.S. Bank’s Private Client Reserve.
The S&P 500 shed 2.76 points, or 0.1%, to close at 2,170.84 after the large-cap gauge hit a record intraday high of 2,178.29. A 3.3% drop in the energy sector dragged the S&P 500 into negative territory, outweighing modest gains in health-care and tech stocks.
The Dow Jones Industrial Average fell 27.73 points, or 0.2%, to close at 18,404.51.
However, the Nasdaq Composite Index climbed 22.06 points, or 0.4%, to end at 5,184.20, boosted by appetite for tech giants, including a 1.8% jump in shares of Apple Inc. .
Meanwhile, losses for crude snowballed, with the U.S. oil benchmark dropping almost 4% and at one point trading below the key $40 level amid worries about a supply glut and subdued demand. Crude oil is now off 21.8% from its peak of $51.23 a barrel hit in early June, signifying a bear market, or drop of at least 20% from a recent peak.
On the economic front, the Institute for Supply Management’s closely watched manufacturing index for July fell to 52.6 from 53.2, while construction spending fell 0.6% in June. The Markit manufacturing purchasing managers index for July rose to 52.9 compared with June’s 51.3.
“People are nervous as oil crashes below $40, given the context of the weak GDP report and somewhat weak ISM data. They are back to doubting whether the market’s rally is as strong as it could be,” said Bruce McCain, chief investment strategist at Key Private Bank.
Prospects for a near-term interest-rate increase by the Federal Reserve have faded since the weak GDP reading on Friday.
Corporate quarterly results will continue to feature prominently this week even as the season winds down, though no major companies reported Monday. So far, about two-thirds of S&P 500 companies have announced quarterly results thus far, with 71% beating on earnings and 57% reporting revenue above estimates, FactSet data show.
Fed speakers: The market appeared to brush aside comments from New York Federal Reserve Bank President William Dudley and Dallas Fed President Rob Kaplan, who both argued at separate events Sunday and Monday that an interest-rate hike this yearshouldn’t be ruled out.
Read:
This aging bull market can grind out more all-time highs
Stocks to watch: Shares in Tesla Motors Inc. and SolarCity Corp. lost ground on news that the companies have reached a merger agreement. SolarCity also released updated guidance.
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