By Wallace Witkowski and Anora Mahmudova, MarketWatch

Biotechnology stocks slide, weigh on Nasdaq; Dow buoyed by DuPont gains

The S&P 500 snapped a five-day winning streak to close slightly lower Tuesday, as a selloff in biotechnology and health-care stocks overshadowed gains in energy and materials sectors.

The Dow Jones Industrial Average managed to eke out a small gain, buoyed by a surge in DuPont Co.

The S&P 500 closed 7.13 points, or 0.4%, lower at 1,979.92, with seven of its 10 main sectors closing lower. Health-care sector led losers, falling 2.3%, while energy and materials followed rising oil prices higher.

The Dow Jones Industrial Average eked out a small gain, adding 13.76 points, or less than 0.1%, to 16,790.19, with nearly half of the blue-chip companies finishing higher.

The Nasdaq Composite ended the day down 32.90 points, or 0.7%, at 4,748.36, weighed down by sinking biotech stocks. The iShares Nasdaq Biotechnology ETF (IBB) dropped as much as 7%, but pared losses to finish 3.6% lower.

A widening U.S. trade deficit and a cut in the International Monetary Fund's global economic outlook undercut positive momentum in the broad stock-market indexes in early trade, though some analysts dismissed the importance of the IMF downgrade.

On Tuesday, the IMF said (http://www.marketwatch.com/story/imf-trims-global-forecast-as-brazil-canada-outlooks-deteriorate-2015-10-06)it was more pessimistic about prospects for world growth as declining commodity prices and increasing financial market volatility take their toll, particularly on emerging -market economies.

A report on international trade showed the U.S. trade deficit (http://www.marketwatch.com/story/us-exports-fall-in-august-to-three-year-low-2015-10-06) jumped almost 16% in August to $48.3 billion, largely because of a strong dollar that reduced exports to their lowest level in three years. A stronger dollar has already been blamed for weaker revenues at multinational companies over the past few quarters.

That widening deficit could shave off one-half to three-fourths of a percentage point from third-quarter gross domestic product because businesses won't be adding to their inventories, and that is weighing heavily on Tuesday's markets, said James Paulsen, chief investment strategist and economist at Wells Fargo Capital Management.

"The trade number was more concerning [than the IMF news]," Paulsen said. "It churns up fears of a global recession. I think it's temporary, but it did damage to the global outlook."

Over the past week, investors have shifted their expectations about interest-rate increases further into the next year.

Before Friday's lackluster nonfarm-payrolls report, investors were expecting the central bank to lift rates by the end of 2015, based on the health of the economy and comments from Fed officials. However, most traders have ruled out a rate increase this year, with Fed-funds futures putting a probability of a hike in December at 34%. The prospect of lower rates for longer boosted market sentiment.

"The base case is for range trading--when the S&P 500 trades between 1985 and 2000 and we might see retests of the August lows a few more times before the market moves definitively higher," said John Blank, chief equity strategist at Zacks Investment Research.

Earnings: Third-quarter earnings season unofficially kicks off when Alcoa Inc.(AA) reports earnings (http://www.marketwatch.com/story/what-to-watch-for-in-alcoas-earnings-2015-10-05) after the closing bell Thursday. Shares jumped 5.5% on Tuesday.

PepsiCo Inc.(PEP) shares rose 1.3% after the company reported adjusted third-quarter earnings that beat analyst expectations (http://www.marketwatch.com/story/pepsico-shares-rise-29-after-earnings-beat-forecasts-2015-10-06).

Freeport-McMoRan Inc.(FCX) stock rose 5.8% after the company said it was reviewing alternatives for its oil-and-gas business, including a spinoff of a joint venture, and reducing its board, as it combats a slump in commodity prices.

Movers & shakers: Shares of DuPont Co.(DD) surged more than 7.7% after the chemical company late Monday said longtime chief executive Ellen Kullman will retire on Oct. 16 (http://www.marketwatch.com/story/dupont-reduces-outlook-and-announces-departure-of-ceo-shares-rally-2015-10-05).

Oil and materials companies were among the top gainers on the S&P 500. Transocean Ltd.(RIG) rose 7.2% while Marathon Oil Corp.(MRO) jumped 6.2%.

Shares of Skyworks Solutions Inc.(SWKS) fell 1.4% after the semiconductor company said it would buy PMC-Sierra Inc.(PMCS) for $2 billion in cash. PMC shares jumped 33% to $10.24.

Other markets:European stock markets (http://www.marketwatch.com/story/european-stocks-fall-from-two-week-high-2015-10-06) closed modestly higher.

Asian markets closed mostly higher (http://www.marketwatch.com/storyno-meta-for-guid), with Japan's Nikkei 225 index up 1% on bets the Bank of Japan may further loosen monetary policy at its meeting this week.

Oil futures settled up 4.9% at $48.53 a barrel (http://www.marketwatch.com/storyno-meta-for-guid), while gold settled up 0.9% at $1,147.80 an ounce (http://www.marketwatch.com/story/gold-tilts-up-eyes-best-levels-in-about-a-week-2015-10-06) as the market's forecast for an interest-rate hike shifts into 2016. The dollar dropped against (http://www.marketwatch.com/storyno-meta-for-guid) most other major currencies.

--Sara Sjolin in London contributed to this article.

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(END) Dow Jones Newswires

October 06, 2015 16:44 ET (20:44 GMT)

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