By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
UBS strategists: Now isn't the time to bail out of stocks
NEW YORK (MarketWatch) -- U.S. stocks steadied after dipping
into negative territory on Monday as investors remained cautious in
light of last week's selloff on Wall Street and geopolitical
concerns.
Earlier, investors took comfort from news that Portuguese
central banks unveiled a plan to rescue troubled Banco Espírito
Santo, but gains have been muted.
The S&P 500 (SPX) was flat at 1,925.60. The Dow Jones
Industrial Average (DJI) fell 16 points, or 0.1%, to 16,476.00. The
Nasdaq Composite (RIXF) rose 6 points, or 0.1% to 4,358.24.
Follow MarketWatch's live blog of today's stock-market
action.
The data calendar is empty for Monday and few earnings reports
are being reported.
Portugal's central bank late Sunday announced a rescue plan of
Banco Espírito Santo, in which the bank would be split into "good"
and "bad" banks with the "good" bank receiving EUR4.9 billion in
state funds. The upheaval surrounding the bank has some investors
worried about renewed turmoil for Europe's banking system. That
news drove a rally in Portugal stocks and also inspired some gains
in Europe .
With no U.S. data on the docket, investors focused on last
week's performance, which included the biggest weekly drop in two
years for the S&P 500 (SPX). Nonfarm-payroll data missed
forecasts, but the gains provided more evidence that the economy
continues to gain momentum, which in turn makes it more likely the
Federal Reserve could raise interest rates sooner than
expected.
Low volumes
Uri Landesman, president of Platinum Partners, a New York-based
hedge fund, hopes the market finally cracks here. Landesman has
been calling for a 10%-15% correction for some time.
"This week's action will be very important. If we snap back and
rally it would mean that the bulls are in control. If not, then it
would mean that buyers are waiting for markets to go a lot lower
before stepping in. In this case, markets will continue to
sell."
"I think investors in general are very cautious at the moment.
We don't believe we reached the top of the bull market, but there
are some worrying aspects. For example, in the past few months, it
has mostly been retail money rather than institutional money
pouring into the stocks and that is normally associated with the
end of the bull market."
Readings on services and factory orders are due Tuesday, while
data on trade and consumer credit follow later in the week. Read:
Paltry credit-card debt growth signals restrained consumers
Mark Haefele and Kiran Ganesh of UBS Wealth Management wrote
that investors should not be panicking because valuations are not
at extremes, nor are investors "exuberant."
"With U.S. GDP growth still on track, the Fed remaining
accommodative, and cash still on the sidelines, now is not the time
for investors to head to the exit," said Haefele, global chief
investment officer, and Ganesh, cross-asset strategist, in a piece
published on CNBC's website. Also read Need to Know for Monday:
Traders put big hedges in places as markets set up for a
rebound
Michael Kors Holdings Ltd. (KORS) fell 6.8% as investors were
worried about increased markdowns that were a drag on the
retailer's margins in its fiscal first quarter.
Cardinal Health Inc. (CAH) also reported profits that topped
estimates, but shares fell 4.2%.
Amgen Inc. (AMGN) rose 1.1% after the biopharmaceutical company
said a Phase 3 clinical trial for a late-stage treatment of
multiple myeloma was successful.
Mobileye N.V. (MBLY) rose 7.8% after soaring 48% on Friday, when
the company debuted on a stock market. For more on today's notable
movers, read our Movers & Shakers column.
Berkshire Hathaway Inc.(BRKA) (BRK/A) shares rose 2% ahead of
quarterly results due late Friday.
In overseas markets, Asian stocks had a mixed session, with the
Shanghai Composite Index up 1.7% and the Nikkei 225 index off 0.3%.
Gold prices (GCU4) edged down, while oil (CLU4) was flat and the
dollar (DXY) recouped some losses from last week.
More must-reads from MarketWatch:
History says don't count on a big correction soon
Three market signs point to 20% tumble for U.S. stocks
Warning: That plunge in stocks is just the beginning
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