By Wallace Witkowski and Anora Mahmudova, MarketWatch

Weak economic data clouds case for Fed rate hike

U.S. stocks closed slightly higher Tuesday, with the tech-heavy Nasdaq logging a record close as investors digested a weak services-sector report, which might help convince the Federal Reserve to stay its hand as it considers raising interest rates.

The S&P 500 index rose 6.50 points, or 0.3%, to close at 2,186.48, led by sharp gains in energy, utilities, and telecom stocks. Earlier, a slide in retail was checked by the dollar's downturn. The prospect of lower rates for longer tends to be a negative for the currency, but a lower dollar is beneficial to multinational companies, making their exports relatively cheaper.

The Dow Jones Industrial Average finished up 46.16 points, or 0.3%, at 18,538.12. Chevron Corp(CVX) and Boeing Co. shares led the average higher, closing up more than 1%, while shares of Nike Inc.(NKE)United Technologies Corp. (UTX), Home Depot Inc.(HD)and General Electric Co.(GE) weighed on blue chips.

Meanwhile, the Nasdaq Composite Index rose 26.01 points, or 0.5% to a new closing high of 5,275.91.

Also, the Russell 2000 index briefly touched a 52-week high of 1,254.41 Tuesday, and closed up fractionally just above 1,253.

Read:Small-cap stocks aim high thanks to U.S. economy (http://www.marketwatch.com/story/small-cap-stocks-aim-high-thanks-to-us-economy-2016-09-06)

The Institute for Supply Management said its nonmanufacturing index fell (http://www.marketwatch.com/story/service-side-of-us-economy-grows-at-slowest-pace-since-2010-ism-finds-2016-09-06) to 51.4% last month from 55.5% in July--the slowest pace of growth since 2010. Bond yields (http://www.marketwatch.com/story/treasury-yields-fall-to-nearly-2-week-low-after-weak-services-sector-data-2016-09-06) and the dollar fell sharply (http://www.marketwatch.com/story/dollar-meanders-as-investors-look-for-central-bank-clarity-2016-09-06) following the report as investors continue to play down the possibility of a rate rise this year.

"Pessimism about retailers earlier was due to bad weather on the East Coast impacting back-to-school spending, as well as news over the weekend about the bankruptcy of Korean shipping giant Hanjin Shipping Co (http://www.marketwatch.com/story/troubled-hanjin-shipping-files-for-bankruptcy-in-us-2016-09-04). that resulted in chaos in some ports," said Diane Jaffee, senior portfolio manager at TCW.

Analysts said the Tuesday session is likely to see stocks trade in a fairly narrow range as U.S. investors try to shake off the cobwebs after an extended weekend, with the market closed on Monday for Labor Day.

"After a number of important data last week, which were all soft, markets are in a slight consolidation mode," said Karyn Cavanaugh, market strategist at Voya Investment Management.

"The fact that a 'soft news is good news' mentality appears back is not great in the long term. But the lack of alternative investment choices will continue to drive U.S. stocks higher in the short term because of relatively attractive valuations," Cavanaugh said.

The S&P 500 and Dow industrials both edged higher last week after a weaker-than-expected monthly jobs report on Friday bolstered the view that the Fed won't raise interest rates in September, fueling a rise in stocks and other assets perceived as relatively risky.

"Stocks are up about 7% since the start of the year, which is not euphoric and there has been a distinct rotation out of defensive stocks into riskier sectors--all because investors are relying on the Fed and other central banks to absorb any risk," Cavanaugh said.

See: This could be a September to remember for investors (http://www.marketwatch.com/story/this-could-be-a-september-to-remember-for-investors-2016-09-01)

Individual movers: Shares in seeds and pesticides giant Monsanto Co.(MON) closed down 1.4%, following an earlier session rise, after German chemicals titan Bayer AG(BAYN.XE) raised its bid for the U.S. company (http://www.marketwatch.com/story/bayer-raises-offer-to-buy-monsanto-2016-09-06-24852015) to $127.50 a share, up from $125 a share.

General Electric Co.(GE) shares declined 0.8% after the conglomerate said it would acquire two European 3-D printing companies (http://www.marketwatch.com/story/ge-to-buy-two-3-d-printing-firms-for-combined-14-billion-2016-09-06) for a combined $1.4 billion, gobbling up Sweden's Arcam AB (ARCM.SK) and Germany's SLM Solutions Group AG(AM3D.XE).

In the deal's wake, shares of U.S. 3-D printing companies Stratasys Ltd.(SSYS) and 3-D Systems Corp.(DDD) closed up 3.8% and 5.6%, respectively. The 3-D Printing ETF(PRNT), which launched in July and hasn't attracted much investor money (http://www.etf.com/PRNT), closed up 5.6%.

Enbridge Inc.(ENB) and Spectra Energy Corp.(SE) announced a stock-for-stock merger transaction, valuing Spectra's common stock at $28 billion to create North America's largest energy infrastructure company (http://www.marketwatch.com/story/enbridge-and-spectra-energy-to-merge-to-create-largest-energy-infrastructure-company-in-n-america-2016-09-06). Enbridge rallied 5.1%, while Spectra closed up more than 13%.

Cepheid(CPHD) soared 53% to close at $52.53 following news that conglomerate Danaher Corp.(DHR) plans to buy (http://www.marketwatch.com/story/danaher-to-buy-diagnostics-maker-cepheid-for-about-4-billion-2016-09-06) the maker of clinical testing gear for $53 a share in cash, or about $4 billion. Danaher shares fell 2.1%.

Chip maker Marvell Technology Group Ltd.(MRVL) dropped 0.5% after reporting that quarterly revenue fell more than expected (http://www.marketwatch.com/story/marvell-technology-swings-to-profit-but-sales-dip-2016-09-06) and issuing a mixed outlook.

Other markets:The U.S. oil benchmark (http://www.marketwatch.com/story/wti-crude-oil-gains-as-russia-saudi-deal-continues-to-generate-buzz-2016-09-06) settled up 0.9% at $44.83 a barrel even as doubts surrounded a Russia-Saudi agreement to monitor the oil market and come up with recommendations to promote stability. European stocks were slightly higher. Gold futures (http://www.marketwatch.com/story/gold-gains-as-dollar-dips-amid-fed-interest-rate-uncertainty-2016-09-06) rallied 2.1% to settle at $1,354 an ounce, their highest level since Aug. 18, and a key dollar index lost ground.

Asian stock markets were broadly higher Tuesday (http://www.marketwatch.com/story/asian-markets-rise-but-aussie-stocks-buck-trend-after-rba-stands-pat-2016-09-06), though Australian equities fell after the central bank there kept interest rates unchanged, and the Philippine benchmark fell after U.S. President Obama canceled a meeting with the country's leader.

Economic news: The Fed's labor-market conditions index (http://www.marketwatch.com/story/feds-labor-market-conditions-index-sinks-back-into-negative-territory-in-august-2016-09-06)slipped back into negative territory in August after a positive reading in July, the seventh negative reading in the past eight months.

Read more:Weak service-sector data could further undercut hawkish Fed stance (http://www.marketwatch.com/story/weak-service-sector-data-could-further-undercut-hawkish-fed-stance-2016-09-03)

Fed speakers: San Francisco Fed President John Williams is slated to speak in Reno at 9:15 p.m. Eastern Time. He isn't currently a voting member of the central bank's policy committee

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--Victor Reklaitis in London contributed to this article.

(END) Dow Jones Newswires

September 06, 2016 16:29 ET (20:29 GMT)

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