By Dan Strumpf
Stocks finished mostly lower Monday, reversing earlier gains,
after a slide in oil prices prompted heavy selling in energy stocks
and spurred renewed fears over the health of the global
economy.
The Dow Jones Industrial Average fell 24.28 points, or 0.1%, to
17366.24, wiping out modest gains that earlier pushed the index to
a fresh intraday record of 17410.65. Energy stocks lost the most
ground, with Dow components Chevron down 2.6% and Exxon Mobil
shedding 1.5%.
The pullback followed an afternoon selloff in the oil market
after Saudi Arabia announced it would cut the price of its crude to
the U.S., suggesting the kingdom is aiming to undercut
once-thriving U.S. producers. Crude-oil futures shed 2.2% to settle
at $78.78 a barrel, their lowest finish since June 2012. Prices
have fallen 27% from recent highs in June.
The S&P 500 slipped 0.24 point to 2017.81. The Nasdaq
Composite Index rose 8.17, or 0.2%, to 4638.91.
While falling oil prices are generally seen as an economic boon,
investors are concerned that the deep slide of the last few months
could spell deflation, or declines in prices throughout the economy
that can spell economic trouble, said Viren Chandrasoma, managing
director of equity trading at Credit Suisse.
"It's essentially a reading on global growth, and that's why I
think it's making people nervous," he said of the drop in oil
prices. "The economic numbers are still looking good, but if oil
keeps going lower, you look at it from a macro implication and it's
deflationary."
The afternoon slide in oil prices jolted Monday's otherwise
quiet market that saw many investors sitting tight ahead of
headlines expected later in the week. On Tuesday, voters will go to
the polls for midterm elections, while on Friday the closely
watched monthly employment report is expected to show another month
of solid jobs gains by U.S. employers.
Despite Monday's slide, the S&P 500 remains up 9.2% so far
this year. Last week, both the Dow and S&P 500 surged to record
highs after the Bank of Japan announced it would expand its recent
stimulus efforts. Such measures by central banks globally have been
credited with boosting risky assets such as stocks this year.
Meanwhile, investors remain cheered by data suggesting the U.S.
economy remains on solid footing. On Monday, the Institute for
Supply Management said its main gauge for the factory sector rose
to 59 last month from 56.6 in September, besting expectations for a
reading of 56.
"There are things going on that favor the U.S. over the rest of
the world," said Paul Zemsky, who helps manage about $30 billion in
global investments for Voya Investment Management. "Growth is
getting better...The U.S. earnings situation, we're coming off a
great quarter." Mr. Zemsky said he holds a sizable position in U.S.
stocks, and favors domestic stocks over bonds.
Data on Europe's manufacturing sector failed to impress. The
Stoxx Europe 600 fell 0.8% after data showed only a modest pickup
in eurozone manufacturing activity in October.
Friday's jobs report is expected to show U.S. employers added
233,000 jobs last month, building on 248,000 new jobs added in
September, according to a Wall Street Journal survey of economists.
The unemployment rate is expected to remain steady at 5.9%.
Many investors still expect the stock market to post gains
through the remainder of the year. Gordon Charlop, managing
director at Rosenblatt Securities, said managers are under pressure
to show strong performance for the next few months as they wind
down the year, which means cash that remains on the sidelines is
likely to be put to work.
"The idea of waiting to buy on the dip--time is winding down on
that move," he said.
Corporate mergers announced Monday lifted some shares. French
advertising company Publicis Groupe SA said it had entered a
definitive agreement to buy U.S.-based Sapient for $25 a share.
Sapient shares surged 42%.
Health-care diagnostics company Laboratory Corp. of America
Holdings said Monday it agreed to buy Covance Inc. in a deal worth
about $6.1 billion. Covance also reported results for the most
recent quarter, including better-than-expected revenue that rose
3.7% to $671 million. Laboratory Corp. shares fell 7.4%, while
shares of Covance jumped 26%.
Sysco Corp. shares fell 2.7% after the food-services distributor
said fiscal first-quarter earnings fell 2.4% in part on expenses
related to its pending acquisition by U.S. Foods. The company said
it doesn't expect the deal to close before the first quarter of
next year.
Write to Dan Strumpf at daniel.strumpf@wsj.com