U.S. stocks pare gains as Apple drops; oil rises 1%

U.S. stock market traded mostly higher Monday, with oil advancing more than 1 percent, as investors geared up for two key central bank meetings.

“Attention will inevitably be on Wednesday with two major central banks set to announce their latest policy decisions,” Craig Erlam, senior market analyst at Oanda, said in a note to clients. “It doesn’t help that we’re lacking any notable economic data or events today and tomorrow isn’t looking much more thrilling. That said, markets are looking spritely with a heavy dollar and commodity gains sparking some life into what could otherwise have been a fairly slow day. The softening in the dollar comes following some strong gains on Friday on the back of stronger CPI inflation numbers.”

The Dow Jones industrial average briefly rose more than 100 points before holding about 40 points higher, with 3M contributing the most gains. The S&P 500 rose about 0.2 percent, with financials rising about 1 percent and with Real Estate kicking off its first day as a sector in the index. The Nasdaq composite held near the flatline after briefly falling into negative territory as Apple fell 1 percent.

The U.S. Federal Reserve and the Bank of Japan are both scheduled to deliver their latest decision in monetary policy Wednesday. Market expectations for a Fed rate hike this week are just 12 percent, according to the CME Group’s FedWatch tool. That said, expectations for a December rate hike are roughly 50 percent.

“There’s more expectation that the Fed will hold, but it will be a more hawkish hold,” said Quincy Krosby, market strategist at Prudential Financial. “If [Fed Chair Janet Yellen] wants to guide the market for December, she’s going to have to be more targeted … rather than her plain statement of being data dependent.

The BOJ, meanwhile, is expected to take some action, as speculation points to a possible rate cut deeper into negative territory.

“I think we all know the past BOJ past policies haven’t worked. I don’t think the market would be too thrilled to get more of something that hasn’t worked,” said Maris Ogg, president at Tower Bridge Advisors.

U.S. futures rose sharply on Monday, with Dow futures advancing nearly 80 points, while S&P and Nasdaq futures gained 9 points and 13 points, respectively.

“I think the market is getting used to the idea that the Fed doesn’t do anything this meeting,” Tower Bridge’s Ogg said.

Stocks also received a boost from rising oil prices, which rose 2.32 percent to $44.03 per barrel as Venezuela President Nicolas Maduro said that a deal could be announced this month to stabilize oil markets, which have come under pressure due to a persistent glut and a price collapse over the past two years. “Crude is having a nice day; seems like the market is following that,” said JJ Kinahan, chief strategist at TD Ameritrade.

This week’s data calendar is a light one, but Tower Bridge’s Ogg and Prudential’s Krosby said investors should keep an eye on the housing data that’s due. The latest read on the Housing Market Index showed homebuilder sentiment spiked to its highest level in nearly a year. Later this week, housing starts, existing home sales and the FHFA Home Price Index.

“Janet Yellen doesn’t want to say anything that’at would derail the housing recovery,” said Krosby. “I think there’s a probability that housing continues to get better. There’s a lot of positive consequences that come from that,” Ogg said.

U.S. Treasurys fell Monday, with the two-year note yield near 0.77 percent and the benchmark 10-year yield around 1.69 percent. The dollar fell against a basket of currencies, with the euro near $1.117 and the yen around 101.7.

The Dow Jones industrial average rose 39 points, or 0.22 percent, to 18,163, with IBM leading advancers and Verizon the top decliner.

The S&P 500 rose 4 points, or 0.23 percent, to 2,144, with financials leading advancers and telecommunications as the greatest laggard.

The Nasdaq gained 1 point, or 0.03 percent, to 5,246.

About five stocks advanced for every decliner at the New York Stock Exchange, with an exchange volume of 315 million and a composite volume of 1.521 billion in midday trade.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 15.4.

Source: CNBC