By Saumya Vaishampayan
U.S. stocks ended slightly lower Monday, pulling back from
records as a decline in oil prices weighed on energy stocks.
The Dow Jones Industrial Average fell 23.6 points, or 0.1%, to
18116.84. The blue-chip index rebounded from its lows in afternoon
trade, after falling as much as 86 points earlier.
The S&P 500 lost 0.64 point to 2109.66, while the Nasdaq
Composite added 5.01 points, or 0.1%, to 4960.97. The Nasdaq
notched its ninth session of gains in a row.
Traders said activity was quiet, as it has been in recent
sessions. With stocks sitting just below all-time highs and no news
driving action, investors didn't have much motivation to trade,
said J.T. Cacciabaudo, head of equity trading at Sterne Agee.
"There's nothing else to do, other than keep your positions on and
watch," he said.
Oil prices fell, dragging energy stocks lower. Crude-oil futures
declined 2.7% to $49.45 a barrel. S&P 500 energy stocks fell
0.4%, the second-worst performing sector. Telecom stocks fell the
most, down 0.6%.
Volatility has declined as stocks have pushed to all-time highs.
Some of the international factors that had been contributing to
wider stock swings, such as Greece's ongoing debt negotiations,
have subsided in recent days. The CBOE Volatility Index, which
measures expectations for swings in the S&P 500, fell to its
lowest level of the year on Friday. On Monday, the VIX rose 1.8% to
14.56, just above its 2015 low.
"This is a little bit of a calm after the storm," said Paul
Karos, senior portfolio manager at Whitebox Mutual Funds, which
manages about $1 billion. In January, the Dow posted its biggest
one-month decline in a year. At the same time, Treasury prices
jumped, with the yield on the 10-year note falling the most in one
month since August 2011. Bond yields fall as prices rise.
"We started this year out [with] this huge flight to quality,"
Mr. Karos said, referring to the strength in Treasurys. Bond-like
stocks, such as utilities that pay out big dividends, also did
well. "All of a sudden, in February, we've had the exact opposite.
That's a very strange eight weeks," he said.
For the month, the Dow is up 5.5% and the S&P has advanced
5.7%. The Nasdaq has jumped 7%.
Recent stock-market gains have propelled the tech-heavy Nasdaq
to its highest level in nearly 15 years. The index is within
striking distance of its all-time high of 5048.62, set in March
2000.
"In the late '90s, there were a lot of legitimate companies,
like Cisco [Systems Inc.], that were just wildly overpriced and bid
up because people were so greedy," said David Klaskin, chief
investment officer at Oak Ridge Investments, which manages $4.6
billion. "We're not at that point at all."
As the Nasdaq approaches 5000 this time, he said gains have been
driven by strong performances at companies such as Apple Inc.
"These are companies that make a good investment thesis, and many
of them focus on dividends, which was unheard of back then," he
said, referring to tech stocks such as Apple, Microsoft Corp. and
Intel Corp., which he owns and for which he says the valuations are
reasonable.
Boeing Co. fell the most on the Dow industrials Monday, down
2.3% and contributing about 23 points to the Dow's overall loss.
Goldman Sachs cut its rating on Boeing to sell from neutral.
European stocks rose, with France's CAC 40 adding 0.6% and
Germany's DAX up 0.7%. Greece and its creditors on Friday agreed to
a four-month extension of the country's bailout program. The
agreement soothed fears about a potential exit from the eurozone in
the short term. Greece now has to present budget cuts and economic
overhauls to the supervisors of the bailout, who will review the
proposals on Tuesday.
In other markets, gold futures fell 0.3% to $1200.30 an ounce.
Treasury prices rose, pushing the 10-year yield down to 2.057%.
Among individual stocks, Valeant Pharmaceuticals International
Inc. said Sunday it would buy Salix Pharmaceuticals Ltd for about
$10 billion. Valeant said it would pay $158 a share in cash for
Salix, just above Salix's Friday closing price of $157.85. Valeant
shares jumped 15%, while those of Salix fell 1.3%.
"Usually when M&A activity heats up, it's a very positive
sign" for stocks, said Mr. Cacciabaudo of Sterne Agee. "You'll see
investors start to chase M&A," he added.
Goldman Sachs Group Inc. lifted the top end on its range of
potential legal losses to about $3 billion. That estimate was about
$2.5 billion in November. Shares fell 0.6%.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
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