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By Ellie Ismailidou and Barbara Kollmeyer, MarketWatch

Virgin America soars 42% on merger announcement

U.S. stocks slumped on Monday as losses for industrials and materials offset sharp gains in health-care shares.

Meanwhile, a fresh drop in oil prices weighed on risk appetite, eroding investor confidence after last week's comments from Federal Reserve Chairwoman Janet Yellen helped support stock advances.

The S&P 500 fell 6.65 points, or 0.3%, to close at 2,066.13. A 4.8% drop in shares of Freeport-McMoRan Inc. (FCX) as oil tipped lower underscored some of the downbeat moves in the S&P 500's worst-performing sectors, which counterbalanced a 1% jump in health-care on the back of soaring shares of Edwards Lifesciences Corp. S&P 500 industrials and materials sectors were both off about 1%, headlining the declines.

The Dow Jones Industrial Average ended 55.75 points, or 0.3%, lower at 17,737.00, led by declines for Goldman Sachs (GS), Nike Inc., Caterpillar Inc. (CAT) and 3M Co. (MMM).

Meanwhile, the Nasdaq Composite fell 25 points, or 0.5%, to 4,889.

Some Wall Street participants described Monday's action as a reset, coming at the end of a choppy first-quarter and just ahead of earnings season.

"I think a good way to describe today is housecleaning," said J.J. Kinahan, chief strategist at TD Ameritrade. Kinahan said the "sideways" trading environment is typical of what you'd see in the "first week of a new quarter."

Investors are shifting their focus to corporate earnings, which are expected to be lackluster, and that might have also helped push stocks lower.

"I think we're starting to move from a market pulled by the Fed to one that is pulled more by fundamentals," said John Manley, chief equity strategist at Wells Fargo Advantage Funds.

As investors turn their attention to the earnings season over the next month, starting next week with Alcoa Inc. (AA), the recent equity-market rally could fizzle out quickly, as earnings are projected to tumble, which could weigh on sentiment, said Tina Byles Williams, chief investment officer at FIS Group.

A silver lining is the fact that investors aren't facing a strong dollar , something that has weighed on corporate earnings over the past year or so. The gauge of a half a dozen of the buck's rival currencies was about 0.1% lower Monday.

On Friday, the S&P 500 posted its biggest weekly gain in a month (http://www.marketwatch.com/story/us-stock-futures-retreat-ahead-of-jobs-report-2016-04-01), after nonfarm payrolls and other economic data convinced some investors the Fed won't be rushing to increase interest rates in April. However, comments from Fed officials recently have contrasted sharply with Yellen's more dovish stance.

During a Monday speech at a conference on cybersecurity, Boston Fed President Eric Rosengren said rate-hikes may come sooner than the market is expecting (http://www.marketwatch.com/story/feds-rosengren-sees-more-and-faster-rate-hikes-than-the-market-expects-2016-04-04). Rosengren is a voting member of the Fed policy committee this year and has typically been dovish in his previous comments.

Uncertainty about the FOMC's ultimate interest-rate plan and stock's recent reversal from its Feb. 11 lows has made forecasting Wall Street's near-term moves challenging.

"The market is getting close to where it topped last year, so it could be running into a ceiling. The big question is whether it will go sideways from here or it will see a sharp correction," said Colin Cieszynski, chief market strategist at CMC Markets. In March, the S&P 500 and Dow both gained more than 4%.

"I think investors are assuming a risk-off posture with no particular impetus to move higher they are going to test the 2,050 levels," Kinahan said, referring to the levels for the S&P 500. Some of that aversion to risk was highlighted by the yield on the benchmark 10-year Treasury note which fell to a one-month low at 1.77%.

Helping influence some of that risk-off sentiment was oil prices.

Crude prices fell 3% as comments by a Saudi Arabian prince dampened hopes (http://www.marketwatch.com/story/oil-prices-under-pressure-as-hopes-dim-for-production-cuts-2016-04-04) for an output-freeze deal from major oil producers. Major oil producers are set to hold a meeting April 17 to discuss measures to curb production, but Saudi Arabia has said it would not freeze productions unless Iran also does so.

Lower oil prices have tended to mean a slump in equities, following a recent trend of strong correlation between oil and stock prices, but that correlation has been breaking down somewhat (http://www.marketwatch.com/story/heres-why-the-relationship-between-oil-and-stocks-is-fading-2016-04-04).

Also read:Dollar, oil and Fed to drive stocks as earnings and data take back seat (http://www.marketwatch.com/story/dollar-oil-and-fed-to-drive-stocks-as-earnings-and-data-take-backseat-2016-04-02)

Weak oil prices and a drop in the Nikkei 225 index on Monday drove investors into the Japanese yen (http://www.marketwatch.com/story/dollar-drifts-lower-against-japanese-yen-on-cautious-fed-view-2016-04-04).

Economic docket:Factory orders fell sharply in February (http://www.marketwatch.com/story/factory-orders-slump-17-in-february-2016-04-04), after a collapse in bookings for oil equipment and planes, the Commerce Department said on Monday.

Looking ahead, investors will closely scrutinize the Fed's minutes from its March meeting, due to be released on Wednesday.

Read:Hiring boom says economy not running on empty (http://www.marketwatch.com/story/hiring-boom-says-economy-not-running-on-empty-2016-04-03)

Stocks to watch: Shares of SunEdison Inc. (SUNE) plunged 51% after news that the company is preparing to declare bankruptcy amid an investigation by the Securities and Exchange Commission.

Shares of Virgin America Inc. (VA) catapulted 42% higher after Alaska Air Group Inc. (ALK) said it would buy the airline for $57 a share in cash (http://www.marketwatch.com/story/alaska-air-group-to-buy-virgin-america-in-4-billion-deal-2016-04-04), a price that is above the $38.90 closing share price on Friday.

Tesla Motors Inc. (TSLA) rose 4% after Chief Executive Officer Elon Musk said reservations for its new, more affordable, Model 3 electric car have topped 276,000 (http://www.marketwatch.com/story/tesla-model-3-reservations-top-276000-musk-says-2016-04-03) since the company starting accepting deposits on March 21.

PulteGroup Inc. (PHM) saw its shares fall 6.6% after it announced that its Chairman and Chief Executive Officer, Richard Dugas Jr., planned on stepping down.

Edwards Lifesciences Corp. (EW) reached an all-time high of $107.88 (http://www.marketwatch.com/story/edwards-lifesciences-shares-hit-all-time-high-on-upbeat-results-upgrades-2016-04-04), soaring nearly 17%, on Monday after the medical-device marker reported positive results from its "Sapien 3" device used in less-invasive heart surgeries and saw its price-target raised by Wall Street firms.

Read:'Affordable' Tesla Model 3 revealed as Elon Musk charges up the crowd (http://www.marketwatch.com/story/tesla-model-3-elon-musk-charges-up-the-crowd-for-mass-appeal-car-2016-04-01)

Other markets: In Asia (http://www.marketwatch.com/story/japan-stocks-gain-on-good-enough-us-jobs-report-2016-04-03), the Nikkei 225 index fell 0.3%. China, Hong Kong and Taiwan stock markets were closed for a holiday. European stocks (http://www.marketwatch.com/story/european-stocks-higher-but-orange-bouygues-lag-in-telecom-selloff-2016-04-04) ended higher, while gold prices dropped (http://www.marketwatch.com/story/gold-drops-as-dollar-traders-position-for-higher-rates-2016-04-04)0.3% as dollar traders positioned for higher rates.

(END) Dow Jones Newswires

April 04, 2016 16:55 ET (20:55 GMT)

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