Dow drops 100 points; oil hits 3-month low

U.S. stocks traded lower on Monday, with energy stocks weighing as oil prices fell, as investors looked ahead to major earnings reports and central bank meetings.

Chevron, Exxon Mobil and UnitedHealth contributed the most to declines in the Dow Jones industrial average, which held about 100 points lower in midday trade. The Dow is up about 3 percent for the month so far.

“I think everyone is really waiting for a big week — big week for earnings, big week for monetary policy,” said Jeremy Klein, chief market strategist at FBN Securities.

“Crude is continuing to get sold and no one’s talking about it,” he said.

WTI traded nearly 2.7 percent lower, just above $43 a barrel and near levels not seen since May 10. Energy held 2 percent lower in midday trade to lead all 10 S&P 500 sectors lower.

Luana Siegfried, energy research associate at Raymond James, attributed Monday’s decline in oil prices to profit-taking, investor concerns about oversupply, and recent dollar strength. She expects oil to near $60 a barrel sometime in the third quarter.

The 2-year note yield was higher near 0.72 percent ahead of the scheduled afternoon auction. The 10-year yield was lower near 1.56 percent.

U.S. stocks closed higher Friday for their fourth-straight week of gains. The S&P 500 set a fresh record close of 2,175.03, while the Nasdaq composite ended at its highest of the year so far at 5,100.16. Friday marked one of the lightest trade volume days of the year so far.

“We have seen the (economic) data outperform,” said John Caruso, senior market strategist at RJO Futures. However, he noted concern about low trade volume.

Cash levels are at the highest levels since November 2001, according to the latest Bank of America Merrill Lynch Fund Manager Survey released last week.

No major economic data was due Monday. GDP and housing data are among the major reports due later in the week.

The U.S. Federal Reserve is scheduled to conclude its two-day meeting Wednesday afternoon. While the central bank is not generally expected to raise rates, indications in the statement on the timing of the next hike will be key.

The Bank of Japan decision on monetary policy is expected overnight Thursday (Eastern Time). Traders will be watching for further accommodation and the reaction of the dollar-yen.

The U.S. dollar index traded mildly lower after on Friday posting its first five-week win streak since January. The euro was near $1.098 and the yen near 106 yen versus the greenback as of 12:14 p.m. ET. Pound sterling was near $1.31.

In corporate news, Verizon announced Monday plans to acquire Yahoo for $4.8 billion in cash.

Apple is scheduled to report earnings Tuesday after the close. 3M, Caterpillar, DuPont, McDonald’s, United Technologies and Verizon are due to post results ahead of the open.

Major European indexes were mixed, with the STOXX Europe 600 Banks index trading about half a percent lower.

Asian stocks closed mostly higher, with the Shanghai composite and Hang Seng mildly higher but the Nikkei 225 a touch lower.

In midday trade Monday, the Dow Jones industrial average declined 113 points, or 0.61 percent, to 18,456, with Chevron leading decliners and Nike leading a few advancers.

The S&P 500 was off about 13 points, or 0.58 percent, at 2,162 with energy leading all 10 sectors lower.

The Nasdaq composite declined 15 points, or 0.29 percent, to 5,085.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded higher above 13.5.

About two stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 290 million and a composite volume of 1.3 billion in midday trade.

U.S. crude oil futures for September delivery traded $1.16 lower at $43.02 a barrel on the New York Mercantile Exchange.

Gold futures for August delivery declined $3.10 to $1,320 an ounce as of 12:46 p.m. ET.

Source: CNBC