By Abhiram Nandakumar
REUTERS - U.S. stocks were slightly lower in volatile trading on Monday, two days ahead of an expected U.S. interest rate hike, as crude oil prices hovered near 11-year lows.
The S&P energy sector was down 0.95 percent on Monday, with crude staying firmly below $40 a barrel, amid mounting fears of a worsening supply glut as OPEC and non-OPEC producers war over prices.
The meltdown in the energy sector has hit the U.S. high-yield energy bonds, while the overall cash market weakened slightly on more fund liquidations.
"It's the (Fed) communique that's going to count, but the real problem here is the junk bond market, which is tied to oil prices," said Peter Cardillo, chief market economist at First Standard Financial in New York.
"A lot of paper written to oil companies are in question, and so it ties in with the price of oil," he said.
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The Federal Reserve begins a two-day policy meeting on Tuesday at which it is expected to raise interest rates for the first time in nearly a decade.
Traders see a 79 percent chance that the Fed will lift rates, according to the CME Group's FedWatch program.
At 11:08 a.m. ET (1608 GMT), the Dow Jones industrial average was down 55.45 points, or 0.32 percent, at 17,209.76, the S&P 500 was down 7.3 points, or 0.36 percent, at 2,005.07 and the Nasdaq Composite index was down 23.10 points, or 0.47 percent, at 4,910.37.
Seven of the 10 major S&P sectors were lower, led by the materials sector's 1.7 percent fall.
DuPont shares were down 4.3 percent at $67.45 after the company agreed on Friday to merge with Dow Chemical in a $130 billion deal. Dow Chemical was down 4.2 percent at $51.15.
Both stocks weighed on the S&P materials sector, while DuPont was the biggest drag on the Dow.
Apple was down 1.9 percent at $111.01 after Morgan Stanley and Barclays cut their price targets on the stock. The stock weighed the most on the S&P 500 and Nasdaq.
Jarden was up 2.5 percent at $53.99 after Newell Rubbermaid said it would buy the maker of Sunbeam kitchen appliances in cash and stock. Newell was down 8 percent at $41.70.
GoPro slumped 15.2 percent to $16.23 after Morgan Stanley and Citi cut their ratings and price targets on the stock.
Among gainers, Trina Solar surged 10.7 percent to $10.57 after the company received a go-private proposal from a group that included its chief executive, valuing the company at more than $980 million.
Declining issues outnumbered advancing ones on the NYSE by 2,414 to 580. On the Nasdaq, 1,755 issues fell and 911 advanced.
The S&P 500 index showed one new 52-week highs and 43 new lows, while the Nasdaq recorded 11 new highs and 160 new lows.
(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Anil D'Silva)