U.S. Stocks Little Changed Despite Sharp Drop in Chinese Shares

By Alexander Osipovich and Riva Gold Features Dow Jones Newswires

S&P 500, Dow little changed after closing at record highs Friday

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--Consumer sector rallies as investors buy beaten-down retail shares

--Chinese stocks post biggest daily drop of the year

U.S. stocks were little changed after the Dow Jones Industrial Average and S&P 500 ended last week at records.

Monday's pause came at the start of a busy week of earnings. Consumer-discretionary shares posted some of the biggest moves in an otherwise listless market, as investors snapped up beaten-down shares in brick-and-mortar retailers.

The Dow industrials slipped 8 points, or less than 0.1%, to 21630. The S&P 500 fell less than 0.1%, with its consumer-discretionary sector rising 0.3%.

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Macy's rose 3.1% and Kohl's added 2.7%. Both stocks have slid in recent months amid tough e-commerce competition, but have rebounded over the past week.

"Going into earnings season, there was a lot of pessimism priced into retail stocks," said Brian Jacobsen, senior investment strategist at Wells Fargo Asset Management.

The Nasdaq Composite rose less than 0.1% and hovered near its closing record during the session. The index posted its biggest one-week gain in more than six months on Friday as the tech sector bounced back from a spate of declines that began June 9. The S&P 500 technology sector has risen more than 4% so far this month after declining 2.7% in June.

Meanwhile, Blue Apron Holdings fell 10%, touching its lowest point since going public last month, following news that a unit of Amazon.com filed a trademark to begin a meal-kit service.

Shares of BlackRock, the world's largest money manager, fell 3.1% after its second-quarter results fell short of analysts' expectations.

Netflix was set to report results after the close, followed later in the week by other tech firms such as Microsoft and eBay and banks such as Goldman Sachs Group, Bank of America and Morgan Stanley.

"This week is going to be about earnings, earnings, earnings," said Nick Angilletta, head of capital markets for the Americas at Deutsche Bank Wealth Management.

Of the 6% of S&P 500 companies that had reported second-quarter earnings as of Friday, 80% had beaten analysts' earnings estimates, according to FactSet.

Friday's records for the Dow and S&P 500 followed softer-than-expected U.S. economic data, which damped expectations of further Federal Reserve interest-rate increases. Investors now see a roughly 48% chance of higher rates by the end of the year, compared with around 59% a week ago, according to Fed-funds futures tracked by CME Group.

The yield on the 10-year Treasury note was at 2.309% Monday, according to Tradeweb, compared with 2.319% Friday. Yields rise as prices fall.

Ultralow interest rates have supported stock markets in recent years and investors had worried recently that central banks around the globe were preparing to dial back on ultra-easy monetary policies.

The Stoxx Europe 600 rose less than 0.1% Monday, with investors awaiting a meeting of the European Central Bank on Thursday to see whether an improving economy prompts the bank to shift its tone.

Chinese equity markets were volatile. Shanghai's benchmark index fell 1.4% in its biggest daily drop this year, while the Shenzhen Composite tumbled 3.6%.

The declines came even after the world's second-biggest economy beat expectations with 6.9% second-quarter growth.

China's top officials signaled over the weekend that the country's campaign against runaway debt and speculation remains a priority, dragging down small-cap shares. Policy makers at the National Financial Work Conference, which is held every five years and wrapped up on Saturday, mentioned "risk" 31 times and "regulation" 28 times, noted Jack Siu, an investment strategist for Asia-Pacific at Credit Suisse.

Adding to Monday's early gloom was a series of profit warnings from small-cap Chinese companies, as several listed stocks u-turned on their financial-health projections.

Ese Erheriene contributed to this article.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com and Riva Gold at riva.gold@wsj.com

(END) Dow Jones Newswires

July 17, 2017 16:27 ET (20:27 GMT)