By Ellie Ismailidou and Wallace Witkowski, MarketWatch

Mattress Firm bounces higher on deal news; oil gains boost energy shares

U.S. stocks traded moderately lower Monday as Wall Street caught its breath from Friday's record-setting rally fueled by jobs data, which helped revive investor confidence in the U.S. economy. A sharp rise in oil prices boosted energy companies' shares but didn't manage to nudge the broader stock market higher.

The market looks like a "a reluctant bull," said Thomas Wilson, senior investment manager at Brinker Capital, referring to Monday's muted trading after Friday's rally.

The S&P 500 index pulled back from an intraday all-time high of 2,185.54, reached shortly after the opening bell, and was last down 3 points, or 0.1%, at 2,180, as a sharp drop in health-care stocks, outweighed a rise in energy shares, which benefited from a rally in crude-oil futures .

The Dow Jones Industrial Average was down 26 points, or 0.1%, to 18,518. A 1.8% drop in shares of Merck & Co.(MRK) and a 1.6% decline in Pfizer Inc.(PFE) shares dragged the blue-chip gauge down. Oil giants Exxon Mobil Corp.(XOM) and Chevron Corp.(CVX) were leading the gains.

The Nasdaq Composite Index fell 12 points, or 0.2%, to 5,209, after logging its first closing record in more than a year (http://www.marketwatch.com/story/us-stocks-set-for-gains-as-traders-brace-for-upbeat-jobs-report-2016-08-05) on Friday, following the employment report.

The U.S. economy added 255,000 jobs in July (http://www.marketwatch.com/story/us-gains-292000-jobs-in-july-2016-08-05). The reading blasted past analyst expectations, and may nudge the Federal Reserve toward a near-term interest-rate hike.

For the job-fueled rally to be sustainable, Wilson said the market needs an improvement in earnings expectations and a clear indication that the quarterly results show that the so-called earnings recession has bottomed out, he added.

As of Friday, aggregate earnings for the S&P 500 showed a decline of 2.3% year-over-year--still better than the 5.2% fall expected at the beginning of the earnings season, according to S&P Global Market Intelligence.

But the "bull case" for U.S. stocks at this stage appeared pretty simple, said Ian Winer, director of equity trading at Wedbush Securities, namely that "as long as central banks are flooding the market with liquidity and yields are so low, how can you not be in U.S. stocks?"

Still, that masks the fundamental problem that U.S. corporations haven't been spending on their businesses but rather on buying back their own stocks, Winer said.

Meanwhile, even as economic fundamentals show signs of slow improvement, an interest-rate hike by the Fed could come later this year.

"Equity investors [on Friday] appeared comfortable with the idea of a tightening in the U.S.'s monetary conditions," said Ipek Ozkardeskaya, senior market analyst with London Capital Group, in a note.

Read:Sell everything? This stock market dares you (http://www.marketwatch.com/story/sell-everything-this-stock-market-rally-dares-you-2016-08-06)

Ozkardeskaya said if the U.S. economy continues to improve, the markets could give their blessing to an additional 25-basis-point hike by the end of the year. But she says the major challenge for the Fed is that major central banks around the world are easing.

"Hence, by simply maintaining the status quo, the Fed's policy path diverges from the rest of the world," she said.

(http://www.marketwatch.com/story/sell-everything-this-stock-market-rally-dares-you-2016-08-06)There is no major economic data on the calendar for Monday.

(http://www.marketwatch.com/story/sell-everything-this-stock-market-rally-dares-you-2016-08-06)Oil futures (http://www.marketwatch.com/story/oil-futures-steady-near-42-following-volatile-week-2016-08-08) soared alongside on Monday, with September crude up $1.27 cents, or 3%, to $43.07 a barrel, boosted by a report that the Organization of the Petroleum Exporting Countries will hold informal talks at an energy conference in September (http://www.marketwatch.com/story/opec-plans-informal-production-talks-for-september-2016-08-08).

Stocks to watch: Mattress Firm Holding Corp.(MFRM) soared over 114% after South African furniture retailer Steinhoff International Holdings NVsaid it planned to buy the company (http://www.marketwatch.com/story/mattress-firm-bought-by-south-africas-steinhoff-for-24-billion-2016-08-07) for around $2.4 billion in cash. The bid, worth $64 per share in cash, represents a huge premium over Mattress Firm's Friday closing price of $29.74.

Vail Resorts Inc (http://www.marketwatch.com/story/vail-resorts-to-acquire-whistler-blackcomb-in-c139-billion-deal-2016-08-08).(MTN) shares gained 7.1% after the company said it has agreed to buy rival ski-mountain operator Whistler Blackcomb Holdings Inc. (WB.T) in a C$1.39 billion cash-and-stock deal.

EverBank Financial (http://www.marketwatch.com/story/everbanks-stock-surges-after-buyout-deal-with-tiaa-2016-08-08)(EVER) rose 2.8% after the bank said it would be acquired by financial services company TIAA, which was formerly referred to as TIAA-CREF, in a deal valued at around $2.5 billion.

Wal-Mart Stores Inc.(WMT) officially announced its acquisition of Jet.com (http://www.marketwatch.com/story/wal-mart-announces-3-billion-jetcom-acquisition-2016-08-08) for $3 billion in cash, a portion of which will be paid over time. Shares were down 0.7%.

Shares of Delta Air Lines Inc.(DAL) shares slipped 0.2% after the airline lifted a world-wide grounding of flights (http://www.marketwatch.com/story/delta-air-lines-grounds-all-flights-worldwide-after-tech-glitch-everywhere-2016-08-08) due to a computer glitch that left passengers unable to check in.

Allergan PLC (http://www.marketwatch.com/story/allergan-beats-profit-expectations-but-sales-miss-2016-08-08)(AGN) lost 3.2%, after the company beat profit expectations but sales missed forecasts. Tyson Foods Inc (http://www.marketwatch.com/story/tyson-shares-jump-after-raised-outlook-2016-08-08).(TSN) inched lower by 0.1% despite raising its outlook and beat earnings forecasts. News Corp.(NWS.AU) (the owner of the publisher of this report, MarketWatch) is expected to report earnings after the market's close.

Other markets: European stocks (http://www.marketwatch.com/story/banks-help-push-european-stocks-higher-but-airbus-drops-on-bribery-probe-2016-08-08) finished fractionally higher. The Nikkei 225 index soared 2.4%, leading strong gains across Asia, on positive reverberations from strong U.S. jobs data.

The Shanghai Composite Index rose 0.9%. Data released Monday showed Chinese exports (http://www.marketwatch.com/story/chinas-july-exports-slip-worse-than-expected-2016-08-07) continued to fall in dollar terms in July.

The dollar (http://www.marketwatch.com/story/dollar-moderately-higher-as-strong-us-jobs-data-linger-2016-08-08) rose against its major rivals, drawing continued support from last week's strong U.S. jobs report. Gold futures moved lower, dropping 0.1% to $1,342.50 an ounce on the heels of the sharpest drop in 10 weeks after that jobs data.

--Barbara Kollmeyer in Madrid contributed to this article.

 

(END) Dow Jones Newswires

August 08, 2016 13:50 ET (17:50 GMT)

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