U.S. stocks edged lower on Monday on the heels of strong gains in the prior week, as investors weighed fluctuations in the dollar and its impact on other markets, including crude prices.
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Equity markets fluctuated between modest gains and slight losses, tracking the movement of energy stocks as crude oil prices were caught between the weakness in the U.S. dollar and concerns about oversupply. The S&P 500 energy sector was up 0.2 percent after earlier gaining as much as 0.9 percent.
The action in the dollar has closely affected stocks of late as traders anticipate monetary policy tightening by the Federal Reserve sometime later this year. The 20-day correlation between the dollar index and the S&P 500 sits at -0.79. The dollar index was down 0.9 percent on the day.
"People are now way too focused on earnings, which start in a week or two, and what the impact of the stronger dollar will be and until that happens it is going to hold the market in check," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.
While the dollar's rise has been beneficial for consumers, its rapid strengthening has been a problem for a large portion of the market, such as commodities firms and exporters.
"People are prepared for the strength of the dollar to hurt earnings, but by how much they don't know yet," said Polcari.
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The Dow Jones industrial average fell 11.61 points, or 0.06 percent, to 18,116.04, the S&P 500 lost 3.68 points, or 0.17 percent, to 2,104.42 and the Nasdaq Composite dropped 15.44 points, or 0.31 percent, to 5,010.97.
The Nasdaq snapped a five-session winning streak but remains less than 1 percent from a closing record set on March 10, 2000.
In a choppy session, Brent settled up 1.1 percent at $55.92 a barrel, while U.S. crude settled up 1.9 percent at $47.45. The decline in the dollar outweighed oversupply concerns after top exporter Saudi Arabia said it would only mull cutting output if producers outside OPEC do so as well.
Kansas City Southern shares dropped 8 percent to $106.48 as the worst performer on the S&P 500 after the railroad cut its full year revenue forecast.
The Nasdaq Biotech index fell for the first time in nine sessions, down 2.2 percent, after running up nearly 20 percent from its February low.
Volume was light, with about 5.42 billion shares traded on U.S. exchanges, below the 6.86 billion average so far this month, according to BATS Global Markets.
Advancing issues outnumbered declining ones on the NYSE by 1,764 to 1,266, for a 1.39-to-1 ratio; on the Nasdaq, 1,472 issues rose and 1,287 fell for a 1.14-to-1 ratio favoring advancers.
The S&P 500 posted 62 new 52-week highs and 1 new low; the Nasdaq Composite recorded 153 new highs and 34 new lows.
(By Chuck Mikolajczak; Editing by Bernadette Baum and Nick Zieminski)