Crude oil was deadweight for Wall Street on Monday as continued worries over an international supply glut kept commodity traders bearish.
The S&P 500 and Dow Jones Industrial Average both posted losses as crude's selloff dragged the energy sector heavily into the red. The S&P 500 fell 0.13% and the Dow slid 0.15% A rally in biotech helped the Nasdaq remain positive for the day, closing with gains of 0.43%.
Crude oil prices tumbled on Monday as worries over a domestic supply glut continued to spook commodity traders. A read on oil-rig activity in the U.S. on Friday marked the fifth weekly increase in a row.
Worries over an international glut also kept commodity markets under pressure. Iran's oil minister Bijan Namdar Zanganeh noted that the oil market is being squeezed by supply issues. The Organization of the Petroleum Exporting Countries' oil production climbed to roughly record highs in July as Iraq upped its output, according to a Reuters survey on Friday.
"Rising OPEC crude oil production risks postponing the much-anticipated rebalancing of the global petroleum market, adding to the risk of what we think could be an intermediate-term correction down to the $35 per barrel area, as an echo of a similar 2015 slide," Tim Evans, energy futures specialist at Citi, wrote in a note.
West Texas Intermediate crude closed 3.9% lower at $39.99 a barrel on Monday, closing at its lowest since April. The commodity had slipped below $40 a barrel earlier in the session.
The energy sector was the worst performer on markets Monday. Major oilers Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report , Royal Dutch Shell (RDS.A) , Chevron (CVX) - Get Chevron Corporation Report , Total (TOT) - Get Total SA Report and BP (BP) - Get BP Plc Report were all lower, while the Energy Select Sector SPDR ETF (XLE) - Get Energy Select Sector SPDR Fund Report fell 3.3%.
Biogen (BIIB) - Get Biogen Inc. Report and Ionis (IONS) - Get Ionis Pharmaceuticals, Inc. Report lifted the biotech sector after announcing developments in their joint treatment for spinal muscular atrophy. Late-stage study data showed statistically significant improvement in a number of motor functions in those using the treatment. Biogen plans to submit for regulatory approval in the next few months.
It was a quieter morning for earnings releases after the breakneck pace of recent trading days. Major S&P 500 companies including Apple (AAPL) - Get Apple Inc. Report , Facebook (FB) - Get Meta Platforms Inc. Class A Report , Alphabet (GOOGL) - Get Alphabet Inc. Class A Report and Amazon (AMZN) - Get Amazon.com, Inc. Report reported on their recent quarters last week.
Diamond Offshore (DO) - Get Diamond Offshore Drilling, Inc. Report , Loews (L) - Get Loews Corporation Report and AMC Entertainment (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report were among the only earnings releases of note out Monday morning. Diamond Offshore exceeded profit estimates as cost cuts helped to counter weaker demand in the face of lower oil prices. Adjusted earnings of 16 cents a share was more than five times analysts' estimates.
Loews, a holding company which owns a stake in Diamond Offshore, missed quarterly earnings estimates on a large asset write-down at the drilling company. Loews reported a per-share loss of 19 cents compared to profit of 46 cents a share a year earlier.
AMC Entertainment missed earnings estimates in its recent quarter as a summer slump in box-office revenue took a chunk out of its results. The theater chain reported earnings of 24 cents a share on revenue of $764 million. Analysts had expected earnings of 27 cents a share on revenue of $773 million.
Manufacturing activity improved in July as headwinds including depressed demand and a stronger dollar began to fade. The final reading of Markit's PMI settled at 52.9 in July, up from 51.3 in June. However, the ISM Manufacturing Index registered 52.6 in July, below forecasts of 53.1 and June's reading of 53.2.
Construction spending came in weak in June with activity in both the private and public sectors in decline. Spending slid 0.6% in June, according to the Commerce Department, a surprising decline for economists expecting an 0.6% increase.
An interest rate hike this year is not off the table, New York Federal Reserve President William Dudley said Monday. Chances of a 2016 hike were lowered in June as the Brexit vote and weaker labor market performance in May introduced challenges to the Fed's plans to gradually increase rates.
"Market expectations, to my eye, derived from federal funds futures prices, which price in no more than one 25 basis-point rate hike through the end of 2017 ... appear to be too complacent," he told a conference in Bali. Dudley expects the U.S. economy to grow roughly 2% over the next 18 months as consumer spending improves.
Tesla (TSLA) - Get Tesla Inc Report and SolarCity (SCTY) outlined plans to merge on Monday morning. Tesla's buyout offer of $25.83 a share for SolarCity values the alternative-energy company at $2.5 billion. The two companies will further detail their plans on a conference call Monday morning.
Verizon Communications (VZ) - Get Verizon Communications Inc. Report agreed to acquire Fleetmatics Group (FLTX) , which offers Web-based and mobile fleet management services, in a deal valued at $2.4 billion. The telecom expects the deal to close in the fourth quarter.