By Akane Otani and Caitlin Ostroff 

U.S. stocks hovered around the flatline Monday, with gains across sectors capped by declines among shares of industrial and materials companies.

The Dow Jones Industrial Average inched up 42 points, or 0.2%, to 26977. The S&P 500 declined 0.1%, and the Nasdaq Composite fell 0.1%.

Data early Monday showed Germany's manufacturing and services sectors weakened more than expected in September, adding to investors' worries about the health of Europe's biggest economy.

That sent European markets lower, with the Stoxx Europe 600 retreating 0.8% and German government-bond yields slipping further below zero.

Even with Monday's moves, though, U.S. stock indexes remain less than 1% from records. Investors have attributed strong gains there to the relative strength of the U.S. economy. For instance, IHS Markit data showed Monday that business activity in the domestic private sector picked up in September.

"It looks like we're in a slowdown, but that slowdown won't become a recession yet," said Sandip Bhagat, chief investment officer of Whittier Trust, adding he took reassurance from strong labor market data, a robust service sector and still benign inflationary pressures.

Changes in analyst ratings drove swings among individual stocks Monday, with American Airlines losing 1.5% after Bank of America analysts cut their rating for the stock to "neutral" from "buy."

Roku rose 0.9%, paring losses after worries about competition in the streaming-media devices industry sent the stock tumbling the prior week.

Elsewhere, Chinese shares fell after a canceled trip by Chinese negotiators to farms in Montana raised doubts about progress on U.S.-China trade talks. President Trump also late last week rejected suggestions the U.S. would accept a partial trade agreement with China, saying his administration is "looking for a complete deal."

"I think this is the case of, well, we had the promise of more talks but where do we go from here?" said Chris Beauchamp, chief market analyst at online trading firm IG Group.

The Shanghai Composite Index closed nearly 1% lower, while its smaller Shenzhen counterpart fell slightly more than 1%.

"The farm visit news was certainly a factor but having said that, investors' expectations for a quick resolution had been pretty low in the first place," said Zhang Gang, senior analyst at Central China Securities, saying the declines were relatively limited by Chinese standards.

Twists and turns on the trade front aside, the Chinese central bank's decision to hold a key medium-term interest rate steady last week has continued to weigh on sentiment, Mr. Zhang said. "There are few signs that the authorities will significantly loosen monetary policy in the near term," he added.

Hong Kong's Hang Seng fell 0.8% after another weekend of protests. Japan's Nikkei Stock Average was closed for a holiday, and South Korea's Kospi was flat.

Shen Hong and Joseph Wallace contributed to this article.

Write to Akane Otani at akane.otani@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com

(END) Dow Jones Newswires

September 23, 2019 14:47 ET (18:47 GMT)

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