NEW YORK -- Stocks bounced between
small gains and losses before ending the day down as troubling economic
news from China outweighs optimism about more stimulus from the Federal
Reserve.
The stumble marks a pause in a rally
last week that took the Dow Jones industrial average and the Standard
& Poor's 500 to their highest levels in more than four years.
Stock
markets rose last week after the European Central Bank announced a
long-anticipated plan to support struggling countries in the European
Union.
On Friday, after a
weaker-then-expected August employment report, investors became more
hopeful that the Fed will act this week to support the U.S. economy.
Many
analysts remain skeptical that the Fed will do anything more than
reiterate its low interest-rate guidance at the conclusion of its
two-day meeting on Thursday, as it won't want to be seen as getting
involved less than two months ahead of the U.S. presidential election.
"There
is a danger that the Fed could become the focus of a major
Republican-Democrat argument," said Fawad Razaqzada, market strategist
at GFT Markets.
Still, Fed chairman Ben
Bernanke has said U.S. jobs data will be crucial in determining whether
the central bank backs another monetary injection.
Traders
will have a number of events to monitor in Europe over the next few
days, including a meeting of euro finance ministers as well as the
German Constitutional Court's verdict on the legality of Europe's
planned permanent bailout fund.
Greece's debt
inspectors are also due to hold more meetings with the Greek government
as they prepare their latest assessment of the country, which could
determine its future in the euro currency.
Stocks
and the euro posted solid gains last week as tensions over Europe's
debt crisis eased after European Central Bank president Mario Draghi
outlined a new bond-buying program designed to ease the pressure on
Italy and Spain.
"There does still seem to be
an air of optimism around, particularly regarding Europe," said David
Jones, chief market strategist at IG Index. "While the economy is far
from out of the woods yet, it seems the chances of lurching into another
sovereign debt crisis have been greatly reduced by Mario Draghi's
proposal."
In Europe, stocks also took a
breather Monday. In Europe, Germany's DAX was steady at 7,217 while the
CAC-40 in France fell 0.3% percent to 3,509. The FTSE 100 index of
leading British shares was 0.1% higher at 5,799.
The
response to the ECB plan in the bond markets continues to be positive.
The yield on Spain's 10-year bonds was down 0.3 percentage point Monday
to 5.7% while the yield on its three-year bond dropped 0.15 percentage
point at 3.47%. For a number of months now, Spain's 10-year yield has
traded around the 7% mark that is widely-considered unsustainable in the
long-run.
In the currency markets, the euro
gave up some of Friday's big advance, trading 0.3% lower at $1.2783. On
Friday, Europe's single currency rose to $1.2818, its highest level
since May 22, after a lower than expected 96,000 increase in U.S.
nonfarm payrolls in August ratcheted up expectations of another monetary
stimulus from the Fed.
Earlier in Asia,
stocks were mixed after figures showed Chinese imports shrank and export
growth was muted in August. That came on top of the release over the
weekend of data showing sluggish Chinese industrial production and
investment.
Even so, the Shanghai Composite Index gained 0.3% to 2,134.89 and the smaller Shenzhen Composite Index added 0.9% to 899.72.
Japan's
Nikkei 225 fell marginally to close at 8,869.37 after the government
said the economy grew at a slower pace than earlier estimated for the
April-June quarter. Growth stood at an annual 0.7%, slower than the 1.4%
given in August.
South Korea's Kospi fell 0.3% to 1,924.70. But Hong Kong's Hang Seng gained 0.1% to 19,827.170.
Oil markets were also fairly subdued with the benchmark New York rate down 81 cents to $96.61 per barrel.
Associated Press