By Abhiram Nandakumar
REUTERS - U.S. stocks were little changed in volatile trading on Monday, two days ahead of an expected interest rate hike, as oil prices steadied after falling to within touching distance of 11-year lows.
The S&P energy sector reversed course and was up 0.44 percent, even as crude stayed firmly below $40 a barrel, amid mounting fears of a worsening supply glut.
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.
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 programme.
At 12:29 p.m. ET (1729 GMT), the Dow Jones industrial average was up 28.36 points, or 0.16 percent, at 17,293.57.
The S&P 500 was down 0.5 points, or 0.02 percent, at 2,011.87. The index briefly slipped below the psychologically important barrier of 2000 for the first time since mid-October.
The Nasdaq Composite index was down 11.69 points, or 0.24 percent, at 4,921.77.
Seven of the 10 major S&P sectors were lower, led by the materials sector's 1.56 percent fall.
DuPont shares were down 3.4 percent at $68.05 after the company agreed on Friday to merge with Dow Chemical in a $130 billion deal. Dow Chemical was down 3.8 percent at $51.36.
Both stocks weighed on the S&P materials sector.
Apple was down 1.8 percent at $111.17 after Morgan Stanley and Barclays cut their price targets on the stock. The stock weighed the most on the S&P 500 and Nasdaq.
Newell Rubbermaid was down 10.3 percent at $40.61 after it offered to buy Jarden for $13.22 billion. Jarden was up 1 percent at $53.15.
GoPro slumped 15.9 percent to $16.12 after Morgan Stanley and Citi cut their ratings and price targets on the stock.
Among gainers, Trina Solar surged 11.2 percent to $10.61 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 2,326 to 753. On the Nasdaq, 1,656 issues fell and 1,108 rose.
The S&P 500 index showed two new 52-week highs and 53 new lows, while the Nasdaq recorded 13 new highs and 190 new lows.
(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Anil D'Silva)
