U.S. stocks closed higher Monday, helped by a pause in the oil price slide amid continued concerns about the high-yield debt market. Investors also awaited the Federal Reserve’s rates decision due this week. ( Tweet This )
The Dow Jones industrial average rose 100 points after earlier falling more than 100 points. Together, Chevron and Exxon Mobil contributed the most to gains, while Boeing and DuPont were the greatest weights on the index.
“The things hanging over the market are fluctuating — energy prices and what the Fed’s going to do on Wednesday,” said James Meyer, chief investment officer at Tower Bridge Advisors. He said most investors expect the Federal Reserve to raise interest rates for the first time in nine years Wednesday, but the market reaction is uncertain.
“Until then I think we’ve got a few days of volatility,” Meyer said.
The Dow transports traded about half a percent lower after earlier falling more than one percent to hit a new 52-week low. In intraday trade, the index was briefly off more than 20 percent from its all-time intraday high hit in November 2014.
U.S. crude oil settled up 69 cents, or 1.94 percent, at $36.31 a barrel, pausing a six-day losing streak that took crude to its lowest in nearly seven years. WTI turned higher in intraday trade after earlier falling to $34.53 a barrel for the first time since February 2009.
John Kilduff of Again Capital said the intraday bounce makes it look like crude futures have bottomed for this year.
“For technical trading reasons, you saw exhaustive selling this morning. Capitulation-type selling. Volume has been heavy,” Kilduff said. “Plus, the Commitment of Traders Report show record shorts in the market. The boat got tilted too much in one direction.”
Brent held lower after briefly rising to top $38 a barrel. On Friday, brent closed at its lowest in nearly seven years.
Both brent and WTI have declined more than 10 percent since OPEC on Dec. 4 abandoned its output ceiling. OPEC has been pumping near record levels since last year in an attempt to drive higher-cost producers such as U.S. shale firms out of the market.
Natural gas held nearly 5 percent lower in afternoon trade after hitting a low of $1.86, its lowest in nearly 14 years.
“Even though we’re talking about oil, the focus is on the Fed. It’s going to have a much bigger impact on stock prices in the near-term than oil prices,” said Vahan Janjigian, editor of Bottom Line’s Money Masters Stock Report and CIO at Greenwich Wealth Management.
Markets are pricing in a roughly 80 percent chance of a hike on Wednesday, according to CME’s FedWatch tool.
“I think this is nervousness ahead of the Fed meeting and the ripple effect of the junk bond situation Friday with Third Avenue (Management) shutting off liquidity,” said Marc Chaikin, CEO of Chaikin Analytics.
“I think people are hoping that buyers would step in but then with the price of crude dropping again (this morning) and the mining stocks down … it’s kind of hard,” he said.
Materials briefly traded 2 percent lower as the greatest decliner in the S&P 500. Freeport-McMoRan, Dow Chemical, Newmont Mining and DuPont were among the greatest decliners in the sector, falling about 4 percent in afternoon trade.
Dow Chemical and DuPont traded more than 4 percent lower in afternoon trade Monday. The two chemical giants ended last week with gains of 0.1 percent and about 4 percent, respectively, after agreeing to merge in an all-stock deal. Over the weekend, activist Daniel Loeb called for the removal of Dow Chemical CEO Andrew Liveris based on the timing of the merger, The Wall Street Journal reported.
The Alerian MLP ETF (AMLP), which tracks large- and mid-cap energy master limited partnerships, traded about 3 percent lower in afternoon trade. The ETF is down more than 40 percent for the year so far.
The S&P 500 briefly attempted to hold higher, led by telecommunications, after dipping below the psychologically key level of 2,000 in intraday trade for the first time since mid-October.
The Nasdaq composite held mostly lower as Apple declined more than 1 percent, amid news that Morgan Stanley cut its estimate for 2016 iPhone units and earnings estimates. The firm also cut its target to $143 a share from $152, but remains “overweight” on the stock. Earlier, the Nasdaq briefly attempted gains as major tech names such as Microsoftand Amazon traded higher.
The U.S. dollar traded a touch higher against major world currencies, with the euro just below $1.10 and the yen at 120.89 yen against the greenback in afternoon trade.
“I just think it’s a partial reversal of the flight to safety we saw last week. Some of the fear in the market backing off,” said Ben Garber, economist at Moody’s Analytics Capital Markets.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded lower near 23 after briefly topping 26.
On Friday, U.S. stocks closed out a volatile week with sharp losses, as oil hit near-seven-year lows and another corporate merger weighed ahead of the Fed’s highly anticipated decision on rates next week. The S&P 500 had its worst week since the middle of August, while the Dow Jones industrial average and the Nasdaq composite had their worst week in a month.
News of Third Avenue Management preventing withdrawals from its roughly $800 million junk bond fund also unnerved markets Friday.
“It’s not just the one fund by itself but, are there more?” said Nick Raich, CEO of The Earnings Scout.
The SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx USD High Yield Corporate Bond ETF (HYG) both traded about 1 percent lower Monday, after plunging 2 percent Friday. Trade volume in HYG was its second highest, as of mid-afternoon.
European stocks ended sharply lower as low oil prices weighed, with the German DAX off nearly 2 percent.
In Asia, only the Shanghai composite ended higher, up about 2.5 percent after some encouraging reports on Chinese industrial production, retail sales and fixed asset investment.
China’s yuan continued to edge lower, hitting its lowest in more than four years against the U.S. dollar in onshore trading.
The S&P 500 traded 1 point lower, or 0.06 percent, at 2,011, with materials leading five sectors lower and telecommunications the greatest advancer.
The Nasdaq composite declined 4 points, or 0.08 percent, at 4,929.
About four stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 668 million and a composite volume of nearly 3.4 billion as of 3:09 p.m.
Gold futures for February delivery settled down $12.30 at $1,063.40 an ounce.
—CNBC’s Patti Domm and Reuters contributed to this report.