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Stocks pared gains on Monday as worries over how soon the Federal Reserve might hike interest rates kept markets wary.
The S&P 500 was up 0.24%, the Dow Jones Industrial Average gained 0.15%, and the Nasdaq added 0.4%.
Atlanta Fed President Dennis Lockhart skirted a discussion of the Fed's interest rate plans in a speech on Monday, pointing to the highly sensitive nature of markets. "Financial markets seem to be very sensitive to remarks of Fed speakers at the moment," Lockhart noted on Monday. Lockhart did suggest a possible upcoming hike, though, arguing that economic data requires "serious discussion of a policy rate increase."
Minneapolis Fed President Neel Kashkari eased concerns over a September hike, arguing that current economic issues cannot be fixed by monetary policy which lessened the need to act sooner. "There doesn't appear to be a huge urgency to do anything," Kashkari told CNBC. Kashkari, a non-voting member, said he wants to see an improvement in core inflation before action is taken.
Wall Street ended Friday with its worst selloff since the Brexit decision in late June as worries peaked over when the Fed would next tighten monetary policy. Benchmark indexes also closed with their first move of more than 1% since July 8.
"After a very quiet summer, where stocks traded in a very narrow range for the past six weeks, Friday's decline jarred many into revisiting the assumptions about overall market conditions," Paul Nolte, financial analysts at Kingsview Asset Management, wrote in a note. "With so many conflicting signals from the economic data, central bank chatter and nervous investors, it is little wonder that the selling was as intense as it was on Friday. We'll see if cooler heads prevail this week."
Worries spiked after Boston Fed President Eric Rosengren joined the chorus of central bank officials backing a rate hike sooner than later. Rosengren, a voting member of the Federal Open Market Committee, said that the risks to the U.S. economy have diminished and that there are concerns of "growing imbalances in some asset classes" if the Fed does not step in to normalize rates.
Recent weak economic data, including a slowdown in services activity and a weaker-than-expected August jobs report, have undermined investor confidence in the U.S. economy. At the same time, central bank members have shifted their rhetoric to sound more hawkish, suggesting that the U.S. economy is near or at the levels that warrant another rate hike.
The chance of an interest rate hike in September currently has a 24% likelihood, according to CME Group fed funds futures, far higher than a 15% chance a week ago. The majority of investors are banking on a rate hike in December. Chances of a move during the Fed's final meeting of the year sit at 46%.
Crude oil unexpectedly turned higher, paring some of the gains suffered on Friday. Oil declined at the end of last week as worries continued over the poor chances of a production freeze agreement when Organization of Petroleum Exporting Countries meet later this month. Domestic production was also a concern after a weekly reading on Friday showed another increase in the number of active oil rigs in the U.S.
West Texas Intermediate crude oil added 0.6% to $46.19 a barrel on Monday.
In deal news Monday, HP (HPQ - Get Report) said it would pay $1.05 billion for Samsung Electronics' (SSNLF) printer unit in its largest ever printing-related purchase. HP, which split off from software company HPE Enterprise last fall, said the acquisition of Samsung Electronics' technology and its 6,500 or so patents, reflects a push to "disrupt" the outmoded copier segment by replacing devices with more advanced, multifunction printer, or MFP, technology. HP shares added 1.6%.
Canadian fertilizer giants Agrium and (AGU) Potash Corp. of Saskatchewan (POT) agreed to merge in an all-share deal that would create a company with market value of about $28 billion. Postash shareholders will hold 52% of the new company. Potash climbed 0.5%.
Horizon Pharma (HZNP - Get Report) agreed to purchase Raptor Pharmaceutical (RPTP) in an all-cash deal worth around $800 million. The offer of $9 a share values Raptor at a 21% premium to its Friday close. Horizon CEO Timothy Walbert said the deal broadens the company's ability to treat rare diseases. Both companies were inactive.
Perrigo (PRGO - Get Report) rose 3.7% after activist investor Starboard Value disclosed a 4.6% stake, worth nearly $600 million. The investment firm said that Perrigo's stock is currently at a "significant discount to fair value." The company also acknowledged "substantial opportunities" that could increase its value.
American Airlines (AAL - Get Report) fell more than 1% after reporting a decline in traffic in August. The airline posted a 2.8% decline in revenue passenger miles to 20.4 billion, with drops seen in domestic, Atlantic and Latin American traffic. Available seat miles climbed 1.4%, while the passenger load factor fell to 82.9%. American Airlines anticipates a 3% to 5% decline in third-quarter revenue per available seat mile.