Wall Street largely flat as Fed keeps dollar on defensive; oil off

Crude futures tumbled on Monday on profit-taking and a report of higher OPEC production, while pressure lingered on the US dollar as markets priced the possibility that the Federal Reserve would not begin a tightening cycle this year.

US stocks were little changed with commodity-related stocks amassing the bulk of the losses on the S&P 500.

Federal Reserve vice-chairman Stanley Fischer said on Sunday policymakers are still likely to raise interest rates this year, however that is “an expectation, not a commitment,” and could change if the global economy pushes the US economy further off course.

Crude oil futures fell 5 per cent after gaining almost 9 per cent last week, with Brent posting its largest daily drop in six weeks. Secondary sources cited in OPEC’s monthly report said the group pumped 31.57 million barrels per day in September, up 110,000 bpd from August.

The US bond market was closed for the Columbus Day holiday.

On Wall Street, major stock indexes were little changed but utility stocks, often traded in lieu of bonds due to their perceived lower risk and high dividends, outperformed with a 0.9 per cent advance by the S&P 500 utilities index.

Energy was the biggest decliner among the major S&P 500 sectors as crude oil prices slid.

Traders are “taking profits on some very nice moves, particularly on the oil patch,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

He said the gains in utility stocks showed “people are getting a little defensive.”

The Dow Jones industrial average rose 29.3 points, or 0.17 per cent, to 17,113.79, the S&P 500 gained 0.07 points to 2,014.96 and the Nasdaq Composite added 5.74 points, or 0.12 per cent, to 4,836.21.

The pan-European FTSEurofirst 300 index and the euro zone’s blue-chip Euro STOXX 50 index both fell slightly after rallying last week. MSCI’s all-country world equity index was up less than 0.1 per cent.

Chinese stocks jumped over 3 per cent in heavy volume to end at their highest since August. 21. China’s central bank took fresh steps to inject liquidity into the economy and said the stock market’s correction “is almost over.”

Brent fell 5 per cent to US$50 a barrel on its biggest percentage decline since the start of September. US light crude settled down 5.1 per cent to $47.10.

“The OPEC demand forecast for 2016 ... suggests some concern about the strength of demand next year. We are primarily wary of this risk,” said Richard Hastings, macro strategist at North Carolina-based Global Hunter Securities.

The dollar slipped to a three-week low versus a basket of major currencies on doubts whether the Fed would raise interest rates later this year in the face of a weakening global economy.

The euro was up 0.1 per cent at $1.1364 and the yen was 0.2 per cent stronger at 119.98 to the greenback.

China’s yuan firmed as far as 6.3175 to the dollar, its strongest since the August 11 devaluation.

Spot gold rose 0.5 per cent after gaining 1.6 per cent last week.

Copper rose following a more than 3-per cent gain last week after production cuts by Glencore boosted base metals, but analysts warned the shift in output may not be enough to offset weak demand growth in China.