MARKET SNAPSHOT: Stocks Head Lower As Oil Rallies, Bucking Trend

By Ellie Ismailidou and Victor Reklaitis, MarketWatch

Utilities and materials rise; Lumber Liquidators tumbles

U.S. stocks were under pressure Monday afternoon as investors took a defensive posture, bidding up utility and telecom stocks, while selling energy stocks even as crude-oil futures ended sharply higher.

The S&P 500 was 0.3% lower at 1,942. Utilities, up 0.7%, and telecom stocks advancing 0.1%, led the S&P 500's sectors. Energy, down 0.8%, and health-care stocks, sinking 1.1%, led losses.

The Dow Jones Industrial Average was off 50 points, or 0.3%, at 16,588. Caterpillar Inc. (CAT) was the best performer among the blue chips, up nearly 2%, while J.P. Morgan Chase (JPM) shares, off 0.8%, was weighing on the stock-market gauge.

Read: U.S. stocks are more expensive now than at the start of the year (http://www.marketwatch.com/story/us-stocks-are-more-expensive-now-than-at-the-start-of-the-year-2016-02-29)

Meanwhile, the Nasdaq Composite lost 10 points, or 0.2%, to 4,582.

Investors tend to purchase telecom and utility stocks, which usually bear a dividend, when the outlook for the broader stock market weakens. A sharp 1.2% gain in gold prices (http://www.marketwatch.com/story/gold-on-track-for-biggest-monthly-climb-since-2002-2016-02-29) on Monday, may underscore investors' skittishness.

Monday's moves come even as oil prices, a commodity that has been acutely linked to higher stock moves (http://www.marketwatch.com/story/crude-oil-prices-and-stocks-have-never-been-this-closely-wedded-2016-02-22), rallied and a batch of lackluster U.S. economic reports weighed on investor sentiment.

Investors seem to be "in this no-man's-land, where [economic] growth is not good enough to push the market to its former highs but not bad enough to drive it to its lows," said Mike Antonelli, equity sales trader at R.W Baird & Co.

In this scenario, certain drivers "take up the proxy of how the market feels about the market--and crude oil is that right now," Antonelli said, pointing to the recent high correlation between oil and stock prices.

So far in February, the S&P was on track for a 0.3% gain, while the Dow was up 0.9%, while the Nasdaq was on track for a 0.6% February decline.

On Monday, crude futures were trading higher (http://www.marketwatch.com/story/oil-prices-fight-for-gains-as-investors-look-for-signs-of-rising-demand-2016-02-29) amid continued reports favorable to a production freeze, including comments from Nigerian Oil Minister Emmanuel Ibe Kachikwu on CNBC.

The move boosted shares of energy companies, such as Consol Energy Inc. (CNX), up 9.2%, and Williams Companies Inc. (WMB), up 2.6%.

Though talks about a potential production cut don't necessarily mean oil prices have reached their bottom, "but they have certainly led to stabilization in oil prices", which was "enough to take away some of the fears in the [equity] market," said Jeff Carbone, managing director at wealth management firm Cornerstone Financial Partners.

Chinese developments also remained an undercurrent for U.S. stocks. After the closing bell in Shanghai, the People's Bank of China cut its reserve-requirement ratio for that nation's banks (http://www.marketwatch.com/story/china-central-bank-cuts-reserve-ratio-requirement-for-banks-2016-02-29). The fresh stimulus measures somewhat eased fears about a slowdown in the world's second-largest economy, as it showed that "policymakers still have room to support the economy," said Mark Williams, chief Asia economist at Capital Economics, in a note.

On the U.S. economic front, a gauge of pending home sales dipped 2.5% (http://www.marketwatch.com/story/pending-home-sales-fall-25-in-january-2016-02-29) in January, reflecting some impact from the massive East Coast blizzard last month, but also the strong acceleration in home prices.

Meanwhile, a reading of Chicago-area economic activity (http://www.marketwatch.com/story/chicago-pmi-signals-contraction-of-factory-activity-in-february-2016-02-29)indicated contraction in February after looking strong in the prior month. And the Dallas manufacturing index remained in negative territory for the 14th straight month, as new orders and employment fell to their lowest level since 2009.

Chart watchers were also cautioning the S&P is getting close to having its 10-month moving average cross below its 20-month moving average for the first time since 2008. There have been just two other such bearish crossovers in the last 22 years, and "both coincided with cyclical bear markets," warned Jonathan Krinsky (http://www.marketwatch.com/story/the-sp-500-is-close-to-flashing-a-bearish-signal-it-hasnt-displayed-since-2008-2016-02-29), chief market technician at MKM Partners, in a note.

China worries: Global markets were lower overnight after China's central bank guided the yuan lower for a fifth straight session, pushing it to its weakest level in three weeks. The move sparked a selloff in Asian stocks (http://www.marketwatch.com/story/china-stocks-drop-sharply-as-yuan-dips-to-3-week-low-2016-02-28), with China's Shanghai Composite finishing down 2.9%, which fueled selling in equities across the world.

Other markets: European stocks closed with gains after the PBOC's stimulus effort, but nonetheless locked in their third straight monthly decline (http://www.marketwatch.com/story/european-stocks-pull-back-as-g-20-statement-falls-flat-2016-02-29). Meanwhile, Treasury prices rose, pushing yields lower. A key dollar index inched higher.

Individual movers: Shares in Lumber Liquidators Holdings Inc. (LL) lost 7.6% after the embattled flooring retailer posted a steeper-than-anticipated loss (http://www.marketwatch.com/story/lumber-liquidators-swings-to-loss-as-allegations-over-flooring-hit-sales-2016-02-29).

Signet Jewelers Limited (SIG) jumped 11% after the company announced preliminary fourth-quarter earnings that exceeded expectations (http://www.marketwatch.com/story/signet-jewelers-shares-jump-in-premarket-trading-after-preliminary-q4-results-2016-02-29).

Shares in Valeant Pharmaceuticals International Inc. (VRX.T) tumbled 6.7% after the drugmaker said Sunday evening that CEO Michael Pearson has returned from medical leave. The beleaguered Canadian company withdrew earnings guidance and said it would reschedule its planned call to discuss fourth-quarter results (http://www.marketwatch.com/story/valeant-ceo-michael-pearson-returns-to-work-2016-02-28), which had been slated to happen Monday.

Shares in Berkshire Hathaway Inc. (BRKA) (BRKA) gained 2.2% after Warren Buffett released his annual letter to shareholders (http://www.marketwatch.com/story/warren-buffett-says-america-is-still-great-2016-02-27) over the weekend.

Read:Warren Buffett's best opportunity might be his company's own stock (http://www.marketwatch.com/story/warren-buffetts-best-opportunity-might-be-his-companys-own-stock-2016-02-29)

Hertz Global Holdings Inc. (HTZ) and Workday Inc. (WDAY) are among the companies expected to post quarterly results after the market's close.

(END) Dow Jones Newswires

February 29, 2016 14:59 ET (19:59 GMT)

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