CAT Caterpillar Inc

By Ellie Ismailidou and Sara Sjolin, MarketWatch

Energy stocks slump, Valeant jumps after confirming plans for reorganization

U.S. stocks reversed early gains on Tuesday to trade in negative territory, dragged lower as the energy and materials sectors followed oil futures lower.

The S&P 500 index lost 2 points, or 0.1%, to 2,179, after setting a record high of 2,187.69 earlier in the day. The gains in consumer-staples and health-care stocks were offset by losses in energy and materials sectors.

The Dow Jones Industrial Average was down 19 points, or 0.1%, at 18,510, supported by gains for Walt Disney Company(DIS) and Pfizer Inc. (PFE) but weighed down by a 0.8% decline in Caterpillar Inc. (CAT) and a 0.7% drop in American Express Co. (AXP). The blue-chip gauge was below its all-time closing high of 18,595.03, hit July 20.

The Nasdaq Composite Index gained 7 points, or 0.1%, to 5,220, trading just below its all-time closing high of 5,221.12 achieved last Friday.

Also weighing on sentiment was a weaker-than-expected report on U.S. productivity, which has now declined in three straight quarters, according to new data released Tuesday (http://www.marketwatch.com/story/productivity-declines-for-third-straight-quarter-2016-08-09). Second-quarter productivity unexpectedly fell 0.5%, well below expectations.

But a thirst for yield-rich assets continued to support demand for stocks, analysts said, despite falling corporate earnings and unsteady economic fundamentals.

"Investors are chasing [yield] anywhere they can find it. As long as companies keep paying dividends, they're fine. But some are paying out more than they're earning," said Lamar Villere, a portfolio manager at investment manager Villere & Co.

Another reason for the sluggish but sustained advance is that many investors are "hiding out" in the U.S. equity market, piling into sectors traditionally viewed as safety plays in times of uncertainty, such as utilities and telecom--two sectors that are leading the market year-to-date. Telecom is up 19.4% year to date, while utilities boast a 16.7% gain in 2016.

At the same time, the market has been "quite boring for nearly a month now, which we can easily blow off as being part of the summer doldrums," said Frank Cappelleri, technical analyst at Instinet, in emailed comments.

Cappelleri said investors should view what has been muted summer moves for stocks as a positive indication that the market is settling into a new trading range, after breaking out to all-time high levels.

"Low volatility is a classic trait of an uptrend. And uptrends are boring whether they happen in August or a typically more emotional period," Cappelleri said, pointing to the market's seeming inaction in November 2014 as a "classic example" of a "boring" market showing a positive uptrend.

Some investors were also holding on to lingering optimism following the stellar jobs report released on Friday, which helped propel the S&P 500 and the Nasdaq score record highs.

"This mood of optimism has seen a recovery in not only the dollar, but also risk appetite, that has pulled equities and commodities such as oil higher. But can these moves continue with a stronger dollar?" said Richard Perry, analyst at Hantec Markets, in a note.

Economic news: A flurry of data released on Tuesday painted a mixed picture of the U.S. economy.

Wholesale inventories rose a revised 0.3% in June, up from the initial estimate of no change, the Commerce Department said Tuesday (http://www.marketwatch.com/story/us-wholesale-inventories-rise-revised-03-in-june-2016-08-09), suggesting that inventories might not be as big a drag on second-quarter growth as initially estimated.

The NFIB small-business index for July rose 0.1 point to 94.6 (http://www.marketwatch.com/story/small-business-sentiment-ekes-out-a-gain-nfib-says-2016-08-09), continuing a winning streak that began after it touched a two-year low.

There are no Federal Reserve speakers this week. The next big event for the central bank will be Chairwoman Janet Yellen's appearance at the Jackson Hole conference Aug. 26.

See:

Movers and shakers: Shares of Resolute Energy Corp.(REN) rallied 13.9% after the oil and gas company late Monday said its loss narrowed in the second quarter.

Valeant Pharmaceuticals International Inc.(VRX.T) jumped 23.5% after the drugmaker confirmed its full-year guidance and said it would reorganize following another weak quarter (http://www.marketwatch.com/story/valeant-loss-widens-as-company-plans-overhaul-2016-08-09).

Luxury retailer Coach Inc.(COH) posted fiscal fourth-quarter earnings that beat expectations (http://www.marketwatch.com/story/coachs-stock-surges-after-profit-north-american-sales-beat-expectations-2016-08-09), but shares slumped 2.2%.

After the markets close on Tuesday, Walt Disney Co.(DIS), Fossil Group Inc.(FOSL) and Yelp Inc.(YELP) are slated to report earnings results.

Shares in Gap Inc.(GPS) lost 6.3% Tuesday after the clothing retailer said revenue and same-stores sales slipped (http://www.marketwatch.com/story/gap-shares-drop-after-sales-slip-same-store-sales-decline-2016-08-08) in July.

Monster Worldwide Inc.(MWW) rallied 26.2% after Dutch staffing provider Randstad Holding NV (RAND.AE) said it has agreed to buy its rival for $3.40 a share in cash (http://www.marketwatch.com/story/randstad-agrees-to-buy-monster-in-merger-worth-429-million-2016-08-09), a 22.7% premium on Monday's closing price.

Other markets: Oil priced reversed and closed lower (http://www.marketwatch.com/story/oil-prices-walk-back-from-sharp-rally-with-focus-on-us-data-2016-08-09) after a sharp rally on Monday, falling 0.6%.

Metals lost ground across the board, while the dollar traded mixed (http://www.marketwatch.com/story/dollar-flattens-out-ahead-of-japan-holiday-2016-08-09) against other major currencies. The pound slumped to $1.2976, after data showed the U.K. trade deficit widened in June (http://www.marketwatch.com/story/uk-trade-deficit-widened-before-brexit-vote-2016-08-09) as imports hit a record high.

Stock markets in Europe shook off opening losses (http://www.marketwatch.com/story/european-markets-gain-across-the-board-as-opec-meeting-cheers-oil-stocks-2016-08-09) and ended higher, while Asian stocks ended mostly higher after upbeat data from China (http://www.marketwatch.com/story/asian-stocks-mostly-up-despite-weak-economic-news-from-china-2016-08-08).

(END) Dow Jones Newswires

August 09, 2016 15:13 ET (19:13 GMT)

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