Stocks wavered around the unchanged mark in afternoon trade Monday, as investors paused following the biggest weekly gains for major indexes in more than a year.
The Dow Jones Industrial Average recently fell four points, less than 0.1%, to 16801. The S&P 500 index eased four points, or 0.2%, to 1961. The Nasdaq Composite Index declined four points, or 0.1%, to 4479.
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Energy companies posted the biggest declines as crude-oil prices resumed their recent slide. The S&P 500 Energy sector index recently declined 2%. Shares of major producers fell, with Chevron Corp. down 0.6% and Exxon Mobil off 1%.
Traders say that market activity was relatively light, with many investors holding off on placing big trades ahead of an update from the Federal Reserve due Wednesday.
Still, long-term investors remain largely optimistic on the outlook for U.S. stocks for the remainder of the year. While global growth concerns have sent stocks swinging sharply in recent weeks, investors have recently shifted their attention to the third-quarter corporate earnings season and signs of U.S. economic improvement. As of Friday, when 208 companies of the S&P 500 had reported results, the index was on track for 5.6% earnings growth from a year earlier, according to FactSet.
That is higher than the 4.5% earnings growth expected before the reporting season began.
"The U.S. is the place to be right now," said Mike Serio, regional chief investment officer at Wells Fargo Private Bank, which manages $179 billion. "We're seeing money continue to come into the U.S., continue to go into our stock market and continue to go into our bonds."
Mr. Serio said the bank is keeping client portfolios focused on U.S. companies, particularly those likely to benefit from an expanding economy, like industrial and information-technology firms.
Monday's decline comes on the heels of a strong week for stocks. The S&P 500 jumped 4.1% last week, marking its largest weekly percentage gain since January 2013. The Nasdaq Composite increased 5.3%, the biggest weekly percentage gain since December 2011.
European markets pared their steepest losses, but were widely lower. The Stoxx 600 Europe index closed with a 0.6% loss, despite news that the European Central Bank's stress tests showed that all but 13 of the region's leading banks have enough capital to survive another period of economic turbulence. The stress tests are part of an effort to reassure investors that European lenders are back on track.
The decline comes amid persistent skepticism among investors about the health of Europe's banks and the ability of the ECB to cope with a broader economic slowdown, said Michael O'Rourke, chief market strategist at JonesTrading.
"You could say every bank in Europe is healthy and I'm pretty sure 99 out of 100 investors would doubt that," he said.
Brazilian markets fell sharply after elections concluded Sunday showing President Dilma Rousseff winning a second term by a narrow margin. Investors worry that the victory could prolong the country's economic stagnation. The Bovespa fell 2.8% recently.
In commodity markets, crude-oil futures recovered their sharpest losses, but were lower in the afternoon. U.S.-traded futures fell 0.1% to $80.91 a barrel. Gold futures inched down 0.2% to $1228.60 an ounce.
Michael Antonelli, sales trader at Robert W. Baird, said investors are struggling with the implications of the recent slide in oil prices. While lower oil prices are generally a benefit to consumers and companies that consume large amounts of fuel, the retreat has been accompanied by signs of weaker economic growth globally.
"Everybody is watching crude for some sort of clue," he said. "At some point, lower crude prices are a boon...At this point, the deflationary impulse and the slower growth seems to be winning the argument."
In economic news, U.S. pending sales of existing homes increased 0.3% to a seasonally adjusted index level of 105 in September from August, the National Association of Realtors said Monday. An index level of 100 is considered an average level of contract activity. The increase was smaller than expected.
Later in the week, the Federal Reserve is due to hold a two-day policy meeting that concludes Wednesday, with investors eagerly anticipating further guidance on the pace of interest-rate hikes. On Thursday, investors will get an update on third-quarter U.S. economic growth, expected to show growth of 3.1%.
"This is a pivotal week overall," Mr. O'Rourke said. "The amount of news we have coming out should fuel volatility in both directions."
The yield on the 10-year Treasury note fell to 2.250%. Yields fall as prices rise.
In earnings news, Merck Co. reported earnings that beat analysts' expectations, but revenue fell short. The pharmaceutical giant tightened its earnings outlook for the year by three cents on each end, and is now expecting $3.46 to $3.50 a share. It also cut the top end of its revenue forecast and now expects $42.4 billion to $42.8 billion for the year. Shares fell 2.4%.
Valeant Pharmaceuticals International Inc. said it is prepared to raise its offer for Allergan Inc. to at least $200 a share. Allergan also reported third-quarter earnings that beat expectations and raised its guidance for the year. Shares of Allergan eased 0.6%.
Shares of Twitter Inc. fell 2.6%. The company is due to report earnings after the closing bell.