By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) -- The U.S. stock market bounced between
gains and losses before wrapping up Monday's relatively benign
trading session mostly unchanged.
The S&P 500 (SPX) closed 3 points, or 0.2%, lower at
1,961.63, with energy and materials dragging down the benchmark
index.
Meanwhile, the Dow Jones Industrial Average (DJI) and The Nasdaq
Composite (RIXF) eked out marginal gains, finishing up less than a
percentage point. Dow industrials finished at 16,817.94 and the
Nasdaq ended the day at 4,485.93.
Investors flocked to stocks of large, dividend-paying companies
over shares of those businesses tethered to the strength of the
overall economy.
But gains in shares of so-called defensive companies, like
telecoms and consumer-staples stocks, which tend to pay dividends,
were offset by sharp losses in so-called cyclical shares. Cyclical
shares, including energy-and-materials companies, tend to be
dependent on the economy.
Some of the slide in cyclical energy stocks was being attributed
to a research note by Goldman Sachs's analysts, who slashed their
target price for crude oil to $75 from $90. Oil prices fell more
than 25% from their peak this summer.
Across the Atlantic, relatively sanguine results of a series of
tests of the health of the European banking system were
overshadowed by worry over weak German data, sending European stock
markets lower.
This week, markets will focus on the Federal Open Market
Committee meeting, where the central bank is expected to announce
the end of quantitative easing. How QE worked in the U.S. -- and
could work in Europe.
Traders will be looking to see if the Fed drops the"considerable
period" language in referencing its plans keeping rates low, at its
two-day policy meeting, which concludes Wednesday. As several Fed
officials have come out with dovish comments recently, investors
largely expect that guidance to be reiterated.
"There will be no press conference for this meeting therefore,
the chances for a shock pause in tapering is very low," said Nour
Al-Hammoury, chief market strategist at ADS Securities in Abu
Dhabi, in a note. He added the market would likely not see the sort
of wild swings that have characterized benchmark averages over the
past few weeks until that Fed announcement.
Goldman sees another 10% gain for stocks:The S&P 500 should
climb to 2,050 by year-end and rise by 10% to 2,150 in 10 months,
said Goldman Sachs's chief equity strategist David Kostin in a note
to clients Friday. He said that move will come as "investors
recognize the durability of U.S. growth, despite faltering global
activity."
Stocks to watch: GoPro Inc. (GPRO) shares dropped 9.8%,
extending a sharp fall from Friday, when Oppenheimer analysts
initiated a sell rating on the wearable camera maker.
Merck & Co. Inc. (MRK) tightened its outlook for the rest of
the year as expiring patents weighed on sales. Its top line fell
short and shares fell 2%.
Allergan Inc. (AGN) shares rose initially after Valeant
Pharmaceuticals International Inc. (VRX) said it was prepared to
improve its offer for Allergan to a value of at least $200 a share.
But shares closed 1% lower.
Novavax Inc. (NVAX) shares surged 13% after it said it is
preparing to begin a Phase 1 clinical trial of its Ebola vaccine
before the end of the year.
Twitter Inc. (TWTR) reported earnings after the market close
that largely in line with analysts' expectations, but user growth
may not be impressing investors, as the stock is moving lower in
extended-hours trading. Twitter's user growth key to earnings: live
blog
(Read more about the day's notable stocks in Movers &
Shakers column:
http://www.marketwatch.com/story/twitter-merck-allergan-earnings-in-focus-2014-10-26.)
Other markets: European stocks fell after the German Ifo index
of business sentiment fell to 103.2, falling short of forecasts.
The survey's outlook for the German economy also deteriorated
again. Banks were getting a lift from the results of regulators'
stress tests, which found most lenders in good health.
In Asia, markets had a mixed day with Chinese stocks off, but
Japan's Nikkei index climbing. Oil (CLZ4) futures fell, while gold
(GCZ4) prices were mostly unchanged.
Stocks and ETFs linked to Brazil came under sharp pressure in
premarket action, after President Dilma Rousseff won a second term
on Sunday, defeating the conservative Aecio Neves in a narrow
victory. Economists worry that four more years of Rousseff will
increase Brazil's economic downturn.
The Direxion Daily Brazil Bull 3X Shares ETF (BRZU) tumbled 30%,
while U.S.-listed shares of Petroleo Brasileiro SA (PBR) slid 16%
in premarket action.
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