U.S. stocks retreat after two-day rally
NEW YORK (MarketWatch) -- U.S. stocks finished a low-volume session with minor declines Monday as investors moved cautiously ahead of central-bank meetings and the monthly jobs report later in the week.
Monday's moves are "more of a continuation of what the market wants to digest from Europe, and talk now about the jobs report and less of a focus on earnings, which is leaving the market up in the air," said Andrew Fitzpatrick, director of investments at Hinsdale Associates Inc.
"The earnings season is winding down. We got a lot last week, and the theme here is a little disappointing, nothing extreme, but weaker sales and tempered expectations for the future are a little bit of a concern for investors," Fitzpatrick said.
The Dow Jones Industrial Average (DJIA) ended down 2.65 points, or 0.02%, at 13,073.01, suffering its first down day in four and shaving off some of the past two sessions' triple-digit surges.
The heaviest weight among the Dow components, J.P. Morgan Chase & Co. (JPM) , fell 2% after Deutsche Bank AG downgraded the bank to hold from buy, saying earnings estimates might be too lofty. Read more on J.P. Morgan in financial stocks.
The S&P 500 Index (SPX) shed 0.67 point, or 0.1%, to 1,385.30, with telecommunications pacing gains and health care the weakest performer among its 10 sectors. It was the first drop in three sessions.
"The key test for the market will be whether the S&P 500 can hold above 1,375, Friday's break out. If some of the potential negative divergences come to fruition, then support may give way, which will make for the move above 1,375 a false break out," noted Elliot Spar, market strategist at Stifel Nicolaus.
The Nasdaq Composite (COMP) retreated 12.25 points, or 0.4%, to 2,945.84.
Decliners pulled just ahead of advancers on the New York Stock Exchange. The volume of NYSE-listed stocks was 3.18 billion, the lowest volume in two weeks and under this year's daily average of 3.73 billion. Nasdaq composite volume of 1.5 billion was also the lowest in two weeks.
Oil declined as the dollar (DXY) rose against the euro (EURUSD) on worries that central bankers would take overly small steps to boost economic growth. Crude for September delivery (CLU2) fell 0.4% to $89.78 a barrel on the New York Mercantile Exchange. Read more on oil futures.
After meeting on an island in northern Germany, U.S. Treasury Secretary Timothy Geithner and Germany's finance minister on Monday vowed to cooperate in advancing policies to stabilize the global and European economies. Geithner was also expected to meet with European Central Bank President Mario Draghi, who last week reiterated that the ECB would do whatever it takes to safeguard the euro.
Federal Reserve policy makers in Washington are scheduled to conclude a meeting Wednesday, two days before the monthly jobs report is released. The ECB's governing council will meet on Thursday.
"The bar has been lowered," said Fitzpatrick of expectations for the July nonfarm payrolls report, which he pegged at an increase of about 100,000.
Also, a weaker-than-expected report might not get as negative a market reaction as one might expect, given the possible implications on monetary policy decisions by the Fed.
"If it were to disappoint, it could give more ammo to the Fed to act," Fitzpatrick said.