By Ellie Ismailidou and Sara Sjolin, MarketWatch

Dow briefly falls three digits; Apple's shares down 2%

U.S. stocks switched between gains and losses Tuesday afternoon after the Dow industrials recovered from a brief three-digit drop, as Wall Street fought off a new slump in oil prices but continued to deal with the aftershocks of Monday's China-inspired rout.

The S&P 500 was up 2 points, or 0.1%, at 2,014, after falling as much as 0.4% earlier. The worst-performing sectors were materials and information technology, down about 0.2%. Telecommunications led gains, rising 0.7%, followed by consumer staples, up 0.6%.

The Dow Jones Industrial Average was down 16 points, or 0.1%, to 17,132. The Nasdaq Composite lost 1 point or less than 0.1%, to 4,902.

All three indexes opened slightly higher but turned negative in morning trade. Stocks extended losses in the early afternoon as oil prices plummeted more than 2% (http://www.marketwatch.com/story/oil-prices-reverse-gains-as-supply-worries-weigh-2016-01-05) amid concerns about an expanding global supply glut. Stocks have recovered even though oil remains down.

Investors are still trying to make sense of what growing tensions between Iran and Saudi Arabia would mean for oil prices, said Colin Cieszynski, chief market strategist at CMC Markets.

"Markets are confused," he said, as the early assumption was that hostile actions could disrupt supply, pushing price higher.

Now investors fear that political tensions could drive both countries to ramp up supply at a time when an economic slowdown in China would mean lower demand from one of the world's largest oil importers, he added.

Also read: Traders fret Saudi Arabia-Iran conflict may result in fresh flood of oil (http://www.marketwatch.com/story/traders-fret-saudi-arabia-iran-conflict-may-result-in-fresh-flood-of-oil-2016-01-04)

Among individual stocks, oil companies were leading the S&P decliners. Ensco Plc. (ESV) tumbled 5.4%, Transocean Ltd. (RIG) slumped 5.1% and Diamond Offshore Drilling Inc. (DO) fell 4.9%.

Gun stocks rallied (http://www.marketwatch.com/story/gun-stocks-rally-as-obama-outlines-new-measures-2016-01-05)for a second day, as investors bet that new restrictions announced by President Barack Obama (http://www.marketwatch.com/story/at-times-in-tears-obama-expands-gun-controls-2016-01-05) not only wouldn't deter sales but would propel them. Smith & Wesson (SWHC) shares surged 12.5% after the announcement and Sturm, Ruger & Co. (RGR) climbed 7.1%.

"Investors are working through a lot of conflicting things," said Kim Forrest, senior portfolio manager at Fort Pitt Capital.

On one hand, strong auto sales "were pretty much the bright spot last year...and we anticipate that, given the easy credit and the age of the fleet in the U.S., there will still be demand for new cars next year," she said.

Car sales were on track Tuesday for their best-selling month of the year (http://www.marketwatch.com/story/us-car-sales-poised-for-best-year-ever-2016-01-05) and their best December ever as companies reported their sales. New-car revenue is expected to reach a record (http://www.marketwatch.com/story/december-us-new-vehicle-revenue-seen-reaching-record-high-2016-01-05) $58 billion for December, up 15.4% from a year earlier.

On the other hand, investors were still trying to figure out what weak Chinese economic data mean for U.S. growth, particularly since "many of the companies that most excited investors in the last couple of years, such as Apple (AAPL), had some element of China in them," Forrest said.

Apple's shares fell 1.8% Tuesday afternoon, down for a second session on continuing fears about slowing demand for the iPhone and weakness in China.

A surprise cash injection from China's central bank ()into the country's financial system helped stabilize Asian markets somewhat but failed to give global equities a sustained boost. Asian markets remained choppy, with the Shanghai Composite Index swinging in and out of losses before closing 0.3% lower (http://www.marketwatch.com/story/asian-markets-steady-as-china-moves-to-calm-nerves-2016-01-04).

On Monday, all three benchmarks posted steep losses, with the S&P 500 marking the worst start to a new year (http://www.marketwatch.com/story/dow-industrials-hasnt-started-the-year-this-horribly-in-84-years-2016-01-04) in more than a decade. The moves in the U.S. came after a significant fall in Chinese stocks prompted a halt to trading, sparking a selloff in global equities.

Read: These 12 market calls of 2015 have one lesson for turmoil in 2016 (http://www.marketwatch.com/story/these-12-market-calls-of-2015-have-one-lesson-for-investors-2015-12-31)

Other markets: European stocks posted large swings and ended higher (http://www.marketwatch.com/story/european-stocks-waver-after-china-led-market-carnage-2016-01-05), while U.K. stocks , were boosted by mining shares (http://www.marketwatch.com/story/uk-stocks-rebound-after-worst-day-in-three-months-2016-01-05), lifted by higher metals prices.

Gold inched 0.4% higher after settling at its highest level in more than a week (http://www.marketwatch.com/story/gold-draws-haven-bids-amid-china-middle-east-worries-2016-01-04) on Monday as tensions in the Middle East spurred haven demand. Treasury yields continued to decline for a fourth straight session, as global stock-market jitters fueled demand for investors perceived as safe, namely government debt.

The dollar rose against most other major currencies.

Data: In a quiet day on the economic front, the main data were monthly car sales for December.

There are no Federal Reserve speakers on the docket. Investors instead are focusing on the release Wednesday of minutes from the Fed's Dec. 16-17 meeting, when it raised interest rates for the first in almost a decade.

Movers: Among individual car companies, Fiat Chrysler (FCA.MI) reported a 13% increase in car sales for the month, marking the best December for the company in 90 years (http://www.marketwatch.com/story/fiat-chrysler-reports-best-december-sales-in-90-years-2016-01-05). Meanwhile, Ford (F) sales rose 5% in 2015, to mark its best year since 2006.

FLIR Systems Inc. (FLIR) shares jumped 5.2% after Goldman Sachs upgraded the company from neutral to buy on Monday.

Gilead Sciences Inc. (GILD) gained 1.6% after the drugmaker late Monday said the U.S. Food and Drug Administration granted a priority review (http://www.marketwatch.com/story/gilead-gets-fda-priority-review-of-hepatitis-c-combo-drug-2016-01-04-181034922) of its experimental hepatitis C combination drug.

Eli Lilly & Co. (LLY) gained 1.8% after the drugmaker offered guidance for 2016 (http://www.marketwatch.com/story/eli-lilly-shares-fall-2-premarket-as-2016-outlook-lags-estimates-2016-01-05) that was below current FactSet consensus levels.

 

(END) Dow Jones Newswires

January 05, 2016 14:28 ET (19:28 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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