By Corrie Driebusch
U.S. stocks were dragged lower Monday by a continued fall in the
price of oil.
Stocks traded only slightly lower in the morning, as investors
scoured economic reports for clues on the pace of growth. But in
late-morning trading, declines in the price of crude oil
accelerated, pulling major indexes down with it.
The Dow Jones Industrial Average recently traded down 170
points, or 1%, to 17520. The S&P 500 declined 14 points, or
0.7%, to 2090 while the Nasdaq Composite shed 33 points, or 0.7%,
to 5095.
Oil prices have tumbled more than 50% since last summer, and
Monday crude-oil futures dropped 3.8% to $45.31 a barrel. Energy
companies in the S&P 500 were the biggest decliners in the
index, falling 1.9%. Oil majors Chevron Corp. and Exxon Mobil
Corp., which led declines in the Dow industrials Friday, continued
to drag the market lower, falling 3.3% and 1.7%, respectively.
"It's the big crude and oil and commodity-based complex that's
dragging the market lower," said Bill Nichols, head of U.S.
equities at Cantor Fitzgerald LP. On the other hand, more defensive
stocks, or stocks such as utilities and real-estate investment
trusts that pay dividends and have bond-like characteristics,
traded higher.
Still, he added it is notable that the stock market as a whole
is holding up pretty well. U.S. stocks remain near all-time highs.
As of Friday's close the S&P 500 is off 1.3% from its record
close hit May 21.
Earlier on Monday, investors digested a slew of U.S. economic
data. The data were mixed: consumer spending rose 0.2% in June from
a month earlier, in line with expectations, the Commerce Department
said, and consumer prices rose slightly in June, according to the
Federal Reserve's preferred inflation gauge. But the increase in
consumer spending was the smallest since February, a sign that weak
wage growth may be weighing on consumers. Also, the Institute for
Supply Management's manufacturing index declined, casting some
doubt on the Fed raising short-term interest rates earlier than
later.
Investors are waiting for a sustained pickup in consumer
spending, which could spur earnings growth and stock prices for a
wide swath of companies. The steep decline in oil prices over the
last year should act as a driver for spending, many investors say,
as consumers direct the money they have saved on gas elsewhere.
"When it comes to just broad-based spending, they're really
watching how they're spending their dollars," said Paul Buongiorno,
chief investment strategist at Tiedemann Wealth Management.
"If you see strong spending growth...that's someone else's
revenue. That should translate into strong revenue and earnings
growth of broad-based corporate America going forward," he
added.
Though Monday's data matters, Friday's jobs report is seen by
many investors as the next big catalyst for U.S. stocks, as it is
viewed as be a strong determinant for the Fed's timing on raising
short-term interest rates.
"Friday's numbers will tell us what direction we're going to
take in the market in the next three weeks or so," said Kent
Engelke, chief economic strategist at Capitol Securities
Management, adding that wage inflation is the gauge he's most eager
to see.
"It's going to be very tantamount to how aggressive the Fed is
actually going to be," he said.
Economic data also drove stocks around the world. In Asia,
equities dropped after a gauge of Chinese factory-floor activity
slumped to a two-year low and commodity prices continued to
fall.
In Europe, the lingering concern about China's economy dragged
down mining shares, but most other indexes climbed. The Stoxx
Europe 600 rose 0.7%, boosted by some upbeat corporate earnings and
data showing eurozone factory activity in July grew slightly more
rapidly than first estimated.
Germany's DAX gained 1.2% and France's CAC 40 added 0.8%. But
Greece's Athex Composite index, which had been closed since June 29
as the country's debt crisis intensified, plunged 16%.
In other markets, gold prices lost 0.5% to $1090.30 an ounce.
Treasury prices rose slightly, pushing the 10-year yield down to
2.144% from 2.207% on Friday.
In corporate news, shares of auto makers climbed higher on
strong July sales. Ford posted its best U.S. sales performance for
the month since 2006, and Fiat Chrysler Automobiles NV said its
U.S. auto sales rose 6.2% on the month on continued strength in its
Jeep and Chrysler brands. Ford's stock added 0.8% while Fiat
Chrysler rose 1.8%.
Tyson Foods Inc.'s stock fell 9.3% after the U.S. meatpacker
missed expectations and cut its full-year outlook because of weak
beef sales.
Saumya Vaishampayan and Tommy Stubbington contributed to this
article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com