New York: US stocks finished flat on Monday as investors held back before congressional testimony by Fed chairman Ben Bernanke, while scattered buying lifted shares of health insurers and banks.
President Barack Obama revised plans for an overhaul of US healthcare. The Morgan Stanley healthcare payor index rose 1.7%, but investors said financial shares benefited from the focus shifting away from reform in that sector.
The KBW bank index rose 1.9%, but energy shares weighed on the broader market.
Investors are hoping Fed Chairman Ben Bernanke clarifies the Fed’s thinking behind last week’s surprising hike in the discount rate that begins the removal of the extraordinary liquidity that has propped up markets. Investors treaded carefully, leading to the lowest daily volume so far this year.
“People are still trying to figure out what the intentions of Bernanke are, moving forward,” said Dennis Cajigas, senior market strategist at Lind-Waldock, a retail brokerage firm in Chicago.
Was the increase in the discount rate “simply technical rebalancing or normalization? Or is it going to be something that’s indicative of monetary policy down the road?,” he added.
The Dow Jones industrial average dropped 18.97 points, or 0.18%, to end at 10,383.38. The Standard & Poor’s 500 Index shed 1.16 points, or 0.10%, to 1,108.01. The Nasdaq Composite Index fell 1.84 points, or 0.08%, to 2,242.03.
After the bell, upscale retailer Nordstrom Inc reported a lower-than-expected quarterly profit despite strong holiday and online sales and higher margins, driving its shares down 5% in after-hours trade.
The stock had ended regular trading at $36.13, up 1.2% on the New York Stock Exchange.
This week, Wall Street will stay focused on the Federal Reserve chairman. Bernanke is scheduled to testify on monetary policy and the economy before House and Senate committees on Wednesday and Thursday.
During Monday’s regular session, energy shares weighed on the S&P 500, but their impact was mitigated by a jump in banks as investors bet that the White House’s bid to resuscitate the stalled healthcare overhaul would take some of the intense regulatory scrutiny off the banks.
The S&P energy index dropped 1.3%, while shares of Chevron Corp shed 1.5% to $72.96, while Exxon Mobil Corp declined 0.7% to $65.40.
But among banks, JPMorgan Chase rose 2.1% to $40.85 and gave the Dow its biggest boost, while Bank of America added 2.1% to $16.21. The S&P financial index rose 1.1%.
“The Democrats are going to spend so much political capital trying to get healthcare through that they might not necessarily have that capital to get any major financial reform through,” said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore.
Slow trading volume also made investors reluctant to push stocks higher, but a spurt of takeover news involving energy and the pharmaceutical sectors pointed to optimism about share valuations.
In takeover news, oilfield services company Schlumberger Ltd agreed to buy Smith International Inc for $11.34 billion in stock, a deal with “a significant premium,” according to Schlumberger’s own chief executive.
Schlumberger shares fell 3.7% to $61.57 and led decliners in the S&P energy index, but Smith International rose 8.8% to $41.03.
Millipore Corp shares jumped 22.4% to $87.35 after the company received an unsolicited bid from Thermo Fisher Scientific Inc of about $6 billion. Thermo Fisher fell 2.3% to $48.10.
Among health insurers, WellPoint Inc rose 1.7% to $59.44, while shares of Humana rose 5.6% to $47.87 and the stock of UnitedHealth Group Inc gained 3.6% to $33.08.
Analysts said the spur for health insurers was a late Friday announcement of a higher-than-expected payment rate for 2011 for privately run Medicare plans.
Nearly 7 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year’s estimated daily average of 9.65 billion.
Declining stocks slightly outnumbered advancing ones on the NYSE by 1,540 to 1,511, while on the Nasdaq, about 14 stocks rose for every 13 that fell.