Dow closes up 100 as oil snaps six-day losing streak; transports lag

U.S. stocks closed higher Monday, helped by a pause in the oil price slide amid continued concerns about the high-yield debt market. Investors also awaited the Federal Reserve's rates decision due this week. ( Tweet This )

The Dow Jones industrial average added 100 points as the close approached, after earlier falling more than 100 points. Together, Chevron and Exxon Mobil contributed the most to gains, while Boeing and DuPont were the greatest weights on the index.

"The things hanging over the market are fluctuating — energy prices and what the Fed's going to do on Wednesday," said James Meyer, chief investment officer at Tower Bridge Advisors. He said most investors expect the Federal Reserve to raise interest rates for the first time in nine years Wednesday, but the market reaction is uncertain.

"Until then I think we've got a few days of volatility," Meyer said.

Six-month performance

The major U.S. averages extended gains in the final minutes of trade, after struggling for direction throughout the session. Trade volume across the exchanges was its highest in almost three months.

The Dow transports held lower, closing down about half a percent after earlier falling more than one percent to hit a fresh 52-week low. In intraday trade, the index was briefly off more than 20 percent from its all-time intraday high hit in November 2014.

"The transports are a very big indicator that the underlying economy is still very, very weak," said Lance Roberts, chief portfolio strategist at Clarity Financial.

"When you start looking (behind) the scenes of what the transports and junk debt are telling you is, something is eating into corporate profits," he said.

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U.S. crude oil settled up 69 cents, or 1.94 percent, at $36.31 a barrel, pausing a six-day losing streak that took crude to its lowest in nearly seven years. WTI turned higher in intraday trade after earlier falling to $34.53 a barrel for the first time since February 2009.

John Kilduff of Again Capital said the intraday bounce makes it look like crude futures have bottomed for this year.

"For technical trading reasons, you saw exhaustive selling this morning. Capitulation-type selling. Volume has been heavy," Kilduff said. "Plus, the Commitment of Traders Report show record shorts in the market. The boat got tilted too much in one direction."

Brent held lower after briefly rising to top $38 a barrel. On Friday, brent closed at its lowest in nearly seven years.

Both brent and WTI are off more than 10 percent since OPEC on Dec. 4 abandoned its output ceiling. Since last year, OPEC has been pumping near record levels in an effort to drive higher-cost producers such as U.S. shale firms out of the market.

Natural gas pared losses to hold about 4.8 percent lower after hitting a low of $1.86, its lowest in nearly 14 years.

"Even though we're talking about oil, the focus is on the Fed. It's going to have a much bigger impact on stock prices in the near-term than oil prices," said Vahan Janjigian, editor of Bottom Line's Money Masters Stock Report and CIO at Greenwich Wealth Management.

Markets are pricing in a roughly 80 percent chance of a hike on Wednesday, according to CME's FedWatch tool.

"I don't think the rate hike matters. I think the market has certainly played into that. I think what matters more is the verbiage (of the Fed commentary)," Roberts said.

Read More Oil and Fed are wildcards for the week ahead

The S&P 500 ended higher, led by telecommunication stocks, after dipping below the psychologically key level of 2,000 in intraday trade for the first time since mid-October.

Marc Chaikin, CEO of Chaikin Analytics, said attributed the intraday decline in stocks to "nervousness ahead of the Fed meeting and the ripple effect of the junk bond situation Friday with Third Avenue (Management) shutting off liquidity."

"I think people are hoping that buyers would step in but then with the price of crude dropping again (this morning) and the mining stocks down ... it's kind of hard," he said.

Materials lost 1.5 percent as the only decliner in the S&P 500. Freeport-McMoRan fell more than 6 percent, while Dow Chemical, Newmont Mining and DuPont were each down more than 3.5 percent as the greatest sector laggards.

Dow Chemical and DuPont closed more than 3.5 percent lower Monday. The two chemical giants ended last week with gains of 0.1 percent and about 4 percent, respectively, after agreeing to merge in an all-stock deal. Over the weekend, activist Daniel Loeb called for the removal of Dow Chemical CEO Andrew Liveris based on the timing of the merger, The Wall Street Journal reported.

The Alerian MLP ETF (AMLP), which tracks large- and mid-cap energy master limited partnerships, closed down 3.1 percent. The ETF is down more than 40 percent for the year so far.

The Nasdaq composite managed to close higher as major tech names such as Microsoft, Amazon, Facebook and shares of Alphabet jumped.

Apple declined 0.6 percent, amid news that Morgan Stanley cut its estimate for 2016 iPhone units and earnings estimates. The firm also cut its target to $143 a share from $152, but remains "overweight" on the stock.

The U.S. dollar traded a touch higher against major world currencies, with the euro just below $1.10 and the yen at 120.96 yen against the greenback in the close.

Treasury yields held higher, with the 2-year yield near 0.94 percent and the 10-year yield at 2.22 percent.

"I just think it's a partial reversal of the flight to safety we saw last week. Some of the fear in the market backing off," said Ben Garber, economist at Moody's Analytics Capital Markets.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, held below 23 after briefly topping 26.

On Friday, U.S. stocks closed out a volatile week with sharp losses, as oil hit near-seven-year lows and another corporate merger weighed ahead of the Fed's highly anticipated decision on rates next week. The S&P 500 had its worst week since the middle of August, while the Dow Jones industrial average and the Nasdaq composite had their worst week in a month.

News of Third Avenue Management preventing withdrawals from its roughly $800 million junk bond fund also unnerved markets Friday.

"It's not just the one fund by itself but, are there more?" said Nick Raich, CEO of The Earnings Scout.

The SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx USD High Yield Corporate Bond ETF (HYG) both closed nearly 1 percent lower Monday, after plunging 2 percent Friday. Trade volume in HYG was its second highest ever, after a record volume Friday.

European stocks ended sharply lower as low oil prices weighed, with the German DAX off nearly 2 percent.

In Asia, only the Shanghai composite ended higher, up about 2.5 percent after some encouraging reports on Chinese industrial production, retail sales and fixed asset investment.

China's yuan continued to edge lower, hitting its lowest in more than four years against the U.S. dollar in onshore trading.

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The Dow Jones industrial average closed up 103.29 points, or 0.60 percent, at 17,368.50 with Chevron and Exxon Mobil leading advancers, and DuPont the greatest laggard.

The S&P 500 closed up 9.57 points, or 0.48 percent, at 2,021.94, with telecommunications leading nine sectors higher and materials the only decliner.

The Nasdaq composite closed up 18.76 points, or 0.38 percent, at 4,952.23.

About three stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of nearly 1.1 billion and a composite volume of nearly 4.6 billion in the close.

Gold futures for February delivery settled down $12.30 at $1,063.40 an ounce.

—CNBC's Patti Domm and Reuters contributed to this report.

On tap this week:


FOMC begins two-day meeting

8:30 a.m.: CPI; Empire manufacturing index

10 a.m.: NAHB housing market index

4 p.m.: Treasury International Capital


7 a.m.: Mortgage applications

8:30 a.m.: Housing starts

9:15 a.m.: Industrial production

9:45 a.m.: Manufacturing PMI

10:30 a.m.: EIA oil inventories

2 p.m.: FOMC statement

2:30 p.m.: Fed Chair Janet Yellen press briefing


8:30 a.m.: Initial claims; Current account

8:30 a.m.: Philadelphia Fed survey

10 a.m.: Leading indicators

10:30 a.m.: EIA natural gas inventories

4:30 p.m.: Fed balance sheet/money supply


9:45 a.m.: Services PMI

10 a.m.: Atlanta Fed biz inflation expectations

11 a.m.: Kansas City Fed manufacturing index

1 p.m.: Richmond Fed President Jeffrey Lacker speaks on economy

*Planner subject to change.

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