By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks dipped in and out of
negative territory on Monday, as investors flocked to stocks of
large, dividend-paying companies over shares of firms whose
businesses are tethered to the strength of the overall economy and
can be prone to volatility.
Gains in the so-called defensive companies, which tend to
dividends, such as telecoms and consumer staples, were offset by
sharp losses in so-called cyclical shares, like the more economy
-dependent energy-and-materials sectors.
Some of the slide in 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.
The S&P 500 (SPX) moved slightly lower, after recording its
biggest weekly gain of the year last week.
Meanwhile, the Dow Jones Industrial Average (DJI) and The Nasdaq
Composite (RIXF) were trading flat.
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."
The September reading on pending-home sales will be released at
10 a.m. Eastern Time. The week will also deliver data on durable
goods, gross domestic product and consumer spending. Growth data
will be the highlight, with the government expected to report
economic expansion of 3% in the third quarter.
Stocks to watch: GoPro Inc. (GPRO) shares retreated, 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, but shares edged up in premarket.
Allergan Inc. (AGN) shares rose 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.
Health-care and energy sectors are expected to dominate investor
attention this week as they deliver results.
Novavax Inc. (NVAX) shares surged after it said it is preparing
to begin a Phase 1 clinical trial of its Ebola vaccine before the
end of the year.
After the close on Monday, Twitter Inc. (TWTR) will report
earnings. What to look for in Twitter's results
(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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