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 opened higher on Monday
following the worst weekly finish for the S&P 500 in two years
as investors took comfort from news that Portuguese central banks
unveiled a plan to rescue troubled Banco Espírito Santo.
The S&P 500 (SPX) opened 4 points, or 0.1%, higher at 1,930.
The Dow Jones Industrial Average (DJI) added 21 points, or 0.3%, to
16,506. The Nasdaq Composite (RIXF) began the day up 21 points, or
0.5% at 4,373.
Follow MarketWatch's live blog of today's stock-market
action.
The data calendar is empty for Monday and few earnings reports
are expected.
Portugal's central bank late Sunday announced a rescue plan that
includes breaking up Banco Espírito Santo and pouring in billions
of euros in state money. 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 .
Otherwise, with no U.S. data on the docket, investors will
likely be focusing 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.
The S&P 500 lost 2.7% last week, the worst percentage drop
for the index since June 1, 2012, while the Dow industrials (DJI)
fell 2.8%, its biggest drop since the week ended Jan. 24.
Low volumes
Joao Monteiro, analyst at Valutrades, said in a note taht there
could be a temporary lull in market activity because of the paucity
of data and earnings scheduled for Monday. Still, he said investors
must remember that August is notorious for lower-than-average
volumes.
"It could now be a case of traders sitting on hands in the short
term, although with at least the economic calendar set to pick up
from tomorrow, any calm could be short-lived," he said.
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
Amgen Inc. (AMGN) rose 1.7% after the biopharmaceutical company
said a Phase 3 clinical trial for a late-stage treatment of
multiple myeloma was successful.
Michael Kors Holdings Ltd. (KORS) fell 3.8% even as results
topped estimates. Cardinal Health Inc. (CAH) also reported profits
that topped estimates, but shares fell 4.2%
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) could be active after
reporting a rise in second-quarter profit and revenue 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) were flat, while oil (CLU4) ticked lower 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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