By Dan Strumpf
U.S. stocks edged lower Monday, pressured by further signs of
economic weakness in Europe and Japan.
The Dow Jones Industrial Average slipped eight points, or 0.1%,
to 17951 in morning trading. The S&P 500 index gave up one
point to 2075. The Nasdaq Composite Index gained 11 points, or
0.2%, to 4791.
The Dow was weighed down by declines in shares of McDonald's
Corp., which posted sharper-than-expected sales declines in
November. Shares of the fast-food operator fell 3.3%.
The losses come on the heels of declines in Europe, after data
showed German industrial output rose less than expected in October
and Japan's economy contracted 1.9% in the third quarter. The Stoxx
Europe 600 Index declined 0.5%.
"It's Japan and Europe and the weakness there, especially with
the Japanese numbers lighter than expected," said Tom Carter,
managing director at brokerage JonesTrading. Trading activity was
light, he said, and the strong gains for stocks in recent weeks
means "any legitimate excuse will knock this market down."
Japan's economic contraction was previously estimated at 1.6%
for the third quarter, and the downward revision underscores that
the world's No. 3 economy is in a deeper recession than previously
thought.
U.S. stocks, however, have been boosted by signs of steady
economic expansion. Major benchmarks advanced to record highs
Friday, propelling the Dow industrials and the S&P 500 to their
seventh straight week of gains, spurred by a strong U.S. jobs
report for November. The S&P 500 has gained 12% so far this
year.
"The market is still digesting Friday's big day," said Doug
Cote, chief market strategist at Voya Investment Management,
referring to Friday's better-than-expected U.S. jobs report for
November.
He added that stocks could turn higher by the end of the day,
noting that "crude oil is continuing to come down, and I think that
bodes well for the consumer." Crude-oil futures declined another
1.8% to $64.67 a barrel, weighed by a strengthening dollar.
Many investors, Mr. Cote included, still see further gains for
stocks in the next year, buoyed by signs of economic improvement in
the U.S. Many expect stocks to also remain buoyed by monetary
easing efforts by central banks in Europe and Japan, even if the
Federal Reserve tightens interest rates as expected next year.
Economic news is light this week, with many investors focused on
the Fed's policy meeting that ends on Dec. 17 for indications on
the pace of rate increases.
In China, exports in November grew by less than expected as
economic woes in the Japanese and European economies sapped demand
for Chinese goods. China's exports rose 4.7% in November from a
year ago. A Wall Street Journal survey of economists showed a
median growth forecast of 8%.
Gold futures rose 0.3% to $1193.70 an ounce. The yield on the
10-year Treasury note fell to 2.291% from 2.306% on Friday.
In corporate news, Merck & Co. agreed to buy Cubist
Pharmaceuticals Inc. for $8.4 billion. Shares of Merck were little
changed while those of Cubist surged 36%.
Shares of ConocoPhillips fell 3.1% after the oil company said it
expects its capital spending to decline 20% to $13.5 billion next
year from 2014 levels, reflecting lower spending on major projects
and deferred spending elsewhere amid the slide in oil prices.
American Airlines Group Inc. shares declined 0.2% after the
airline reduced its forecast for a key measure of revenue
generation in the fourth quarter.
Write to Dan Strumpf at daniel.strumpf@wsj.com
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