A retreat in crude-oil prices weigh on the broader market
U.S. stocks closed mostly lower on Monday, 22 AUgust 2016, with the Dow industrials and S&P 500 logging modest losses, as the mood turned cautious ahead of a speech by Federal Reserve Chairwoman Janet Yellen at the end of the week. A retreat in crude-oil prices also weighed on the broader market, dragging shares of oil and gas companies into the red.
The Dow Jones Industrial Average eased 23.15 points, or 0.1%, to end at 18,529.42. The Nasdaq Composite Index bucked the losing trend for the benchmarks to edge up 6.22 points, or 0.1%, to close at 5,244.60. The S&P 500 shed 1.23 points, or less than 0.1%, to finish at 2,182.64.
The energy sector sank 0.9%, marking the worst decline among the large-cap benchmark's 10 sectors. The Dow was pressured by declines in Apple and Johnson & Johnson. Visa shares were the best performer among blue chips.
Meanwhile, stocks mostly traded in a narrow range during the session. Investors are awaiting clues about U.S. monetary policy from Federal Reserve Chairwoman Janet Yellen at a retreat of economists and Fed members in Jackson Hole, Wyoming, on Friday. In her planned speech in Jackson Hole, Yellen could signal that the Fed is ready to raise interest rates as soon as next month. Such a statement may weigh on equity investors, who have enjoyed central-bank policies, that have been supportive of the multiyear run-up in stocks.
Weakness in oil futures appeared to set the tone for equities in early action. September West Texas Intermediate crude CLU6, -3.52% slumped more than 3%, with some analysts blaming a rise in the U.S. oil-rig count last week. Meanwhile, Morgan Stanley analysts poured cold water on hopes that major oil producers will freeze production.
In deal news, drug giant Pfizer confirmed it plans to buy biotech Medivation in a move aimed at adding a leading prostate-cancer drug to Pfizer's portfolio. Pfizer's stock slid 0.4%, while Medivation jumped 20%. In other deal news, ChemChina said Monday that a U.S. national-security regulator had cleared its planned $43 billion acquisition of Swiss seed company Syngenta. Chip maker Intersil Corp. soared 20% after Japan's Renesas Electronics Corp. said it is in talks to buy the U.S. company.
Bullion prices finished lower on Monday, 22 August 2016 for a second session, pressured by expectations that a speech from U.S. Federal Reserve Chairwoman Janet Yellen later this week will support an interest-rate hike as soon as September, fueling a rise in the dollar.
On Monday, December gold fell $2.80, or 0.2%, to settle at $1,343.40 an ounce after a 0.8% loss on Friday. Gold managed a gain of roughly 0.2% last week. September silver settled at $18.859 an ounce, down 45.8 cents, or 2.4%. The white metal ended Friday with a roughly 2% weekly decline.
The ICE U.S. dollar index was up 0.1% on Monday as gold futures settled. The greenback had tapped a seven-week low last week but regained a portion of the slide, sending gold still lower in the wake of hawkish rate talk from Fed Vice Chairman Stanley Fischer over the weekend. A firmer dollar makes dollar-priced gold less attractive to overseas buyers. Additionally, higher interest rates can dull the appeal of gold, which doesn't bear interest, in favor of investment alternatives that offer better yields.
Crude oil futures settled with a drop of 3% on Monday, 22 August 2016 as investors cashed in on a seven-session streak of gains, pressured by expectations of higher global crude production. Bets that major oil producers will agree to stabilize oil output at a meeting late next month fed a rally last week, but expectations for an agreement have faded and the market is eyeing the potential for higher production from Iraq and Nigeria.
September West Texas Intermediate crude slid $1.47, or 3%, to settle at $47.05 a barrel on the New York Mercantile Exchange. That was the largest one-day dollar and percentage decline since 1 Aug 2016. The contract expired at Monday's settlement, with October which ended at $47.41 a barrel, down $1.70, or 3.5%, now the front-month contract.
Relative strength among long-dated Treasuries led to some flattening in the yield curve. The yield on the 30-yr bond slipped five basis points (2.24%) while the yield on the benchmark 10-yr note fell four basis points (1.54%).
Today's participation was below the recent average as fewer than 685 million shares changed hands at the NYSE floor.
There was no economic data of note released today.
Tomorrow's economic data will be limited to the New Home Sales Report for July (consensus 580k), which will be released at 10:00 ET.
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