WFR Sunedison, Inc.

By Ellie Ismailidou and Barbara Kollmeyer, MarketWatch

Virgin America soars 40%; Sunedison dives 45%

U.S. stocks on Monday were dipping in and out of positive territory, tracking volatile oil prices, which overshadowed the positive effects of a recent dovish stance by the Federal Reserve.

The S&P 500 was flat at 2,072, led by a 0.9% gain in health-care stocks but weighed by a 0.8% drop in utilities stocks. The Dow Jones Industrial Average was up by 5 points, or less than 0.1%, at 17,797, led by sharp losses for General Electric Co. (GE), down 1.5% and boosted by a 2% gain in Pfizer Inc(PFE)

Meanwhile, the Nasdaq Composite was off by 4 points, or 0.1%, at 4,911.

Monday's moves came after the S&P 500 posted the biggest weekly gain in a month (http://www.marketwatch.com/story/us-stock-futures-retreat-ahead-of-jobs-report-2016-04-01), after nonfarm payrolls and other economic data convinced investors the Fed won't be rushing to increase interest rates and that an April hike isn't in the cards.

But as oil prices wavered Monday, dipping in and out of negative territory, equity prices also retreated, following a recent trend of strong correlation between oil and stock prices.

Brent crude prices also turned lower (http://www.marketwatch.com/story/oil-prices-under-pressure-as-hopes-dim-for-production-cuts-2016-04-04) after comments by a Saudi official dampened hopes for an output-freeze deal from major oil producers. Major oil producers are set to hold a meeting later this month to discuss measures to curb production.

The strong correlation between oil and stock prices "has always been a bit of a mystery as it has no basis on fundamentals," said Tina Byles Williams, chief investment officer at FIS Group. Theoretically, the assets respond to different fundamentals: Oil is tied to supply-demand factors, while stocks should be pegged to earnings outlooks and other factors.

But as investors will turn their attention to the earnings season over the next month, starting next week with Alcoa Inc. (AA), the recent equity-market rally could fizzle out quickly, as earnings are projected to tumble, which should weigh on sentiment, Williams said.

"While the markets called a do-over on the year last week, with the S&P 500 in particular getting back all of what it lost, the same can't be said for U.S. corporate earnings," said Peter Boockvar, chief market analyst at The Lindsey Group.

In early January, first-quarter S&P 500 earnings were expected to be flat year-over-year and up 2.5% excluding energy, according to data from The Lindsey Group. As of Friday, those estimates are now for earnings to fall by 9.5% year-over-year and by 4.7% excluding energy.

A silver lining is the fact that investors aren't facing a strong dollar , something that has weighed on corporate earnings over the past year or so. Weak oil prices and a drop in the Nikkei 225 index on Monday drove investors into the Japanese yen (http://www.marketwatch.com/story/dollar-drifts-lower-against-japanese-yen-on-cautious-fed-view-2016-04-04).

Economic docket:Factory orders fell sharply in February (http://www.marketwatch.com/story/factory-orders-slump-17-in-february-2016-04-04), after a collapse in bookings for oil equipment and planes, the Commerce Department said on Monday.

Overall, this week is less busy for data, but investors will closely scrutinize the Fed minutes from the March meeting, due for release on Wednesday. Minneapolis Fed President Neel Kashkari will speak on too-big-to-fail banks at 7 p.m. Eastern.

Read:Hiring boom says economy not running on empty (http://www.marketwatch.com/story/hiring-boom-says-economy-not-running-on-empty-2016-04-03)

Read:Dollar, oil and Fed to drive stocks as earnings and data take back seat (http://www.marketwatch.com/story/dollar-oil-and-fed-to-drive-stocks-as-earnings-and-data-take-backseat-2016-04-02)

Stocks to watch: Shares of SunEdison Inc. (SUNE) plunged 46% after a report that the company is preparing to declare bankruptcy amid an investigation by the Securities and Exchange Commission.

Shares of Virgin America Inc. (VA) soared 40% after Alaska Air Group Inc. (ALK) said it would buy the airline for $57 a share in cash (http://www.marketwatch.com/story/alaska-air-group-to-buy-virgin-america-in-4-billion-deal-2016-04-04), a price that is above the $38.90 closing share price on Friday.

Tesla Motors Inc. (TSLA) rose 3.6% after Chief Executive Officer Elon Musk said reservations for its new, more affordable, Model 3 electric car have topped 276,000 (http://www.marketwatch.com/story/tesla-model-3-reservations-top-276000-musk-says-2016-04-03) since the company starting accepting deposits on March 21.

Read:'Affordable' Tesla Model 3 revealed as Elon Musk charges up the crowd (http://www.marketwatch.com/story/tesla-model-3-elon-musk-charges-up-the-crowd-for-mass-appeal-car-2016-04-01)

Other markets: In Asia (http://www.marketwatch.com/story/japan-stocks-gain-on-good-enough-us-jobs-report-2016-04-03), the Nikkei 225 index fell 0.3%. China, Hong Kong and Taiwan stock markets were closed for a holiday. European stocks (http://www.marketwatch.com/story/european-stocks-higher-but-orange-bouygues-lag-in-telecom-selloff-2016-04-04) edged higher, while gold prices dropped (http://www.marketwatch.com/story/gold-drops-as-dollar-traders-position-for-higher-rates-2016-04-04)as dollar traders positioned for higher rates.

(END) Dow Jones Newswires

April 04, 2016 10:55 ET (14:55 GMT)

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