IBB iShares Biotechnology ETF

By Ellie Ismailidou and Barbara Kollmeyer, MarketWatch

Equities unlikely to rally if oil doesn't bottom: analyst

U.S. stocks eked out small gains Monday, after dipping in and out of negative territory as a deepening rout in oil prices hit the energy sector on the heels of the worst weekly start ever to a new year.

The S&P 500 and Dow Jones Industrial Average snapped a three-day losing streak, bouncing after posting the largest declines for the first five days of a new calendar year (http://www.marketwatch.com/story/taking-stock-of-an-awful-trading-week-on-wall-street-2016-01-08) in history. But a 6% plunge in oil prices hit energy and materials stocks, limiting gains on the main indexes.

The S&P 500 rose 1.64 points, or less than 0.1%, to end at 1,923.67. The Dow Jones Industrial Average added 52.12 points, or 0.3% to settle at 16,398.57. Meanwhile, the Nasdaq Composite ended the day down 5.64 points, or 0.1%, at 4,637.99, falling for the eighth consecutive session.

The Russell 2000 dipped into bear-market territory earlier in the session, but closed off session lows, down 3.54 points, 0.3% at 1,042.64, according to preliminary data on FactSet. The index fell 1.3% intraday to 1,032, tumbling 20% below its all-time high, set on June 23, 2015--a move which meets the widely used definition for a bear market.

A fresh rout in oil prices (http://www.marketwatch.com/story/oil-prices-under-fresh-pressure-as-china-continues-to-spook-the-market-2016-01-11)pulled energy-related stocks lower, with the energy sector leading the S&P losses, down 2% on the day and 8.8% since the beginning of the year. The U.S. oil benchmark finished under $32 for the firs time since December 2003, adding to worries about the commodity's inability to stabilize.

Materials were the second-worst performing sector, down 1.6% on the day and 9.3% since the beginning of the year.

Read: Oil could fall toward $20, but not for the reason you think (http://www.marketwatch.com/story/oil-could-fall-to-20-but-not-for-the-reason-you-think-2016-01-11)

The general risk aversion hit other sectors that are typically viewed as risky though not directly related to oil, most notably biotech (IBB), which dropped 3.4% on Monday on the heaviest trading volume in more than two months.

"It is highly unlikely that the stock market will begin to rally in any significant way until oil prices find some measure of stability," said James Meyer, chief investment officer at Tower Bridge Advisors, in emailed comments.

Also read: Bearish J.P. Morgan says sell stocks on any rally (http://www.marketwatch.com/story/bearish-jp-morgan-says-sell-stocks-on-any-bounce-2016-01-11)

(http://www.marketwatch.com/story/us-stock-futures-dow-eyes-triple-digit-gain-after-china-ends-higher-2016-01-08)Stocks fell last week amid turmoil in Chinese markets and hand-wringing about the country's economic health, along with plunging commodity prices like crude oil. The S&P 500 lost 6% and the Dow industrials fell 6.2% last week.

On Monday, the Shanghai Composite Index ended 5.3% lower.

Also read: These charts show you can't blame China for U.S. stock-market selloff (http://www.marketwatch.com/story/these-charts-show-you-cant-blame-china-for-us-stock-market-selloff-2016-01-11)

Atlanta Fed President Dennis Lockhart said Monday that there is nothing "fundamentally wrong" with the broad U.S. economy (http://www.marketwatch.com/story/feds-lockhart-nothing-fundamentally-wrong-with-broad-us-economy-despite-bearish-stock-market-2016-01-11) despite the "bearish" global stock environment.

Stocks to watch: This week marks the start of fourth-quarter earnings season. Alcoa Inc. (AA) shares jumped 2.5% in after-hours trading, after the company's fourth-quarter release beat expectations. Alcoa's shares closed down 0.9% Monday after the aluminum producer said it would announce a $1.5-billion long-term supply contract with General Electric Inc.'s (GE) aviation unit on Monday (http://www.marketwatch.com/story/alcoa-gets-15-billion-supply-contract-from-ge-2016-01-11-14853248).

Apple Inc. (AAPL) shares closed 1.6% higher after the technology giant was upgraded at Mizuho Securities (http://www.marketwatch.com/story/apples-stock-jumps-after-analyst-turns-bullish-2016-01-11), which said it believes the recent selloff has left investors with "meaningful" upside potential.

Shire PLC (SHPG) shares lost 8.9% after the company said Monday it has agreed to buy Baxalta Inc (https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiirazTmqLKAhVMMj4KHQzdBQsQqQIIHDAA&url=http%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fshire-agrees-to-acquire-baxalta-in-32-billion-deal-2016-01-11&usg=AFQjCNG78zPHl8W4-63EBT4b5535LCgLtg&sig2=Lud-EdxMgtESDfdAkqos5g&bvm=bv.111396085,d.dmo). (BXLT) in a deal valued at about $32 billion. Baxalta shares fell 2.3%.

Shares of Kohl's Corp. (KSS) gained 4.6% after the department-store chain started preliminary discussions on taking itself private or breaking up the company (http://www.marketwatch.com/story/kohls-considers-going-private-2016-01-11).

Shares of Tesla Inc. (TSLA) released earlier gains falling 1.5% after Chief Executive Officer Elon Musk predicted that within two years, a customer in Los Angeles would be able to "summon" his electric car via cellphone (http://www.marketwatch.com/story/elon-musks-latest-prediction-wows-ahead-of-detroit-auto-show-2016-01-10).

J.P. Morgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and Citigroup Inc. (C) are scheduled to report results at the end of the week. The financial sector is expected to be the second-biggest contributor to earnings growth in a season where overall earnings are forecast to decline by 5.3%, according to John Butters, senior earnings analyst at FactSet.

Read:Citigroup pegged to do heavy lifting as banks begin earnings season (http://www.marketwatch.com/story/citigroup-pegged-to-do-heavy-lifting-as-banks-begin-earnings-season-2016-01-09)

(http://www.marketwatch.com/story/citigroup-pegged-to-do-heavy-lifting-as-banks-begin-earnings-season-2016-01-09)Other markets:European stocks closed at their lowest levels since September (http://www.marketwatch.com/story/european-stocks-set-to-break-losing-streak-as-china-slide-goes-ignored-2016-01-11), after a bouncy session in which they struggled to make headway on the back of a weaker euro.

Gold prices rose marginally, as the dollar rose against the yen , rebounding from its worst weekly performance against the yen since August 2013 (http://www.marketwatch.com/story/yen-slips-against-dollar-as-china-markets-find-stability-2016-01-08). Treasury yields inched higher (http://www.marketwatch.com/story/treasury-yields-rebound-from-3-month-lows-2016-01-11) after logging last week their biggest weekly declines in three months (http://www.marketwatch.com/story/treasury-yield-hit-one-month-lows-2016-01-08).

(END) Dow Jones Newswires

January 11, 2016 16:42 ET (21:42 GMT)

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