By Anora Mahmudova and Carla Mozee, MarketWatch
ISM services index falls in December
NEW YORK (MarketWatch) -- U.S. stocks turned down amid choppy
early trading that had suggested a more upbeat start to Tuesday
trade, as oil prices continue to slump.
Investors are maintaining a cautious posture after a brutal
sell-off on Monday, which saw the closely watched Dow shed 331
points.
On Tuesday, investors were scouring for safe industries such as
utilities, health care and consumer staples, as well as U.S.
Treasurys, pushing yields to seven-month lows.
The S&P 500 (SPX) was roughly flat with defensive sectors,
such as utilities, health care and consumer staples moving higher
earlier in the day. Energy stocks that fell 4% on Monday were also
relatively higher.
The Dow Jones Industrial Average (DJI) inched lower. The Nasdaq
Composite (RIXF) dipped in and out of positive territory and was
heading lower.
10-year Treasurys rallied, pushing the yield 5 basis points to
below 2% for the first time in seven months., indicating that
investors are seeking havens like U.S. government debt. Meanwhile,
oil prices dropped another 2%.
Kate Warne, investment strategist at Edward Jones, said that
Monday's selloff was an overreaction to uncertainty surrounding the
eurozone economy as Greece looks likely to exit the union, while a
slide in oil prices stoked further worries about stagnating global
economic growth outside of the U.S.
"Stable stock prices today is good news and would mean that
investors are assessing if the U.S. economy still remains an island
of growth. In the long-term, lower oil prices is a positive to
major economies, but until oil finds a bottom, there will be
short-term fear over global growth, Warne said.
In economic news, companies in the U.S. service sector such as
retail and real estate grew at a slower but still-healthy pace in
December, according to survey of senior executives. Orders for
goods produced in U.S. factories fell 0.7% in November, hit by
transportation equipment, matching the forecast from
MarketWatch-polled economists, according to government data
released Tuesday.
Analysts also pointed that investors would be weary of making
big bets ahead of the important jobs report on Friday, which will
shed light on how well the U.S. economy is weathering amid global
weakness.
On Monday, U.S. stock markets took a battering as crude-oil
prices slid again and as the dollar (DXY) surged. The S&P 500
and Dow marked their biggest one-day losses in three months.
"One would question whether this is 'Turnaround' Tuesday or
simply a pause before the next leg down," said Brenda Kelly, chief
market strategist at IG, in emailed comments. "The plunge in
equities yesterday was unexpectedly extreme, so we may be
witnessing some profit-taking and an element of
bargain-hunting."
Overall, "we are still in a low-interest-rate environment, and
as has been the case for the past few months, risky assets provide
a yield that cannot be gleaned elsewhere," she wrote.
Crude-oil prices extended losses on Tuesday, with U.S. oil
futures (CLG5) down 1.8%, trading just below $49 a barrel. Brent
futures were down 1.2%, off intraday lows.
"The economic conditions that oil faces continue to be
aggressively against the commodity, making buyers extremely
hesitant to even consider entering long positions," said Jameel
Ahmad, chief market analyst at FXTM, in a Tuesday note. "There are
also suspicions that as oil companies struggle to adapt to lower
profits, there could be mergers and acquisitions taking place in
the future, and this will weigh on investor sentiment. What's the
answer to this equation? Bearish moves for oil."
Stocks to Watch: Verizon Communications Inc. (VZ) has approached
AOL Inc.(AOL) about a possible acquisition or joint venture,
Bloomberg reported Monday, citing people with knowledge of the
matter. Shares in AOL jumped.
Cyberonics Inc.(CYBX) shares fell after the medical-device maker
said an appeals board supported a 2007 decision by the Centers for
Medicare and Medicaid that denied coverage of the company's
pacemaker-like device for treating depression.
Coach Inc. (COH) shares were up slightly after the company said
it's buying luxury footwear brand Stuart Weitzman from private
equity firm Sycamore Partners, in a deal valued at up to $574
million.
Nielsen N.V. (NLSN) shares fell after financial-news network
CNBC said it will no longer rely on the TV-ratings specialist to
measure its daytime audience, beginning later this year.
(Read more: Movers & Shakers column
http://www.marketwatch.com/story/cyberonics-micron-shares-in-focus-tuesday-2015-01-06.).
Other markets: Meanwhile, the yield on the 10-year Treasury fell
below 2%, to 1.97%, according to Tradeweb. Yields have been hitting
lows not seen in almost two years, discounting the mini flash-crash
in mid-October, indicating investors are looking to bonds as a safe
haven.
In Asia, the Nikkei fell 3% to post its biggest one-day loss in
nearly 10 months, and Indian shares plummeted 3.1%, the steepest
loss since September 2013. European stocks turned higher, pushing
back from a loss that followed a clutch of lackluster economic
data.
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