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VOL. 43 | NO. 36 | Friday, September 6, 2019

S&P 500 finishes flat; smaller company stocks notch gains

By ALEX VEIGA AP Business Writer

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Major U.S. stock indexes ended mixed Monday as large companies gave up early gains and smaller companies closed broadly higher.

The S&P 500 ended virtually flat as losses in technology and health care stocks outweighed gains in financials and other sectors. The Russell 2000 index of smaller company stocks, which has lagged the S&P 500 this year, outpaced the rest of the market.

Investors are taking a shine to smaller-company stocks in hopes that they'll be better shielded from the fallout of the costly trade war between the U.S. and China than large multinationals.

"If you're making your product or service in the U.S. and selling it to U.S. customers, you're somewhat more insulated from the global trade volatility and the slower growth that's spawning from that globally, too," said Ben Phillips, chief investment officer at EventShares.

The S&P 500 inched 0.28 points lower, or less than 0.1%, to 2,978.43. The index, which has finished higher the past two weeks, is within 1.6% of its all-time high set in late July.

The Dow Jones Industrial Average rose 38.05 points, or 0.1%, to 26,835.51. The Nasdaq fell 15.64 points, or 0.2%, to 8,087.44. The Russell 2000 climbed 19.06 points, or 1.3%, to 1,524.23.

The broader market has bounced back the past two weeks following a bout of volatility brought on by the trade war as Washington and Beijing imposed new tariffs on more of each other's imported goods. Investors worry the escalation of tariffs may be dampening global economic growth and threatening to nudge the United States into a recession.

Traders are hoping for a deal between the world's two largest economies and were encouraged last week by news that talks will resume in October.

A mixed bag of economic data has also kept Wall Street focused on central banks and whether they will continue taking measures to shore up economic growth. On Friday, Federal Reserve Chairman Jerome Powell said the central bank doesn't expect a recession and will take necessary actions to maintain growth.

Economists expect the Fed to cut interest rates when it meets next week. Separately, the European Central Bank is expected to unveil new monetary stimulus measures on Thursday to help shore up the region's economy.

U.S. stock indexes appeared set to extend their gains from last week in early trading Monday, led by gains in banks and communications companies. But the momentum faded by midmorning and the major indexes veered between small gains and losses the rest of the day.

At the same time, the Russell 2000 continued to climb. It's 13% gain year-to-date is still far behind the 18.8% increase in the S&P 500. That's one reason why the smaller-company stocks are looking attractive right now.

"People are rotating out of the more expensive stuff, some of the things that are probably risky in a downturn, like tech, and going into some more traditional value," Phillips said.

Among the winning small-cap stocks Monday were video-game retailer GameStop, which jumped 10.4%, and prison operator GEO Group, which rose 2.6%.

Payment processors helped weigh down technology sector stocks. Visa slid 2.3%, Mastercard fell 2.8% and PayPal lost 4.2%. Drugmakers led the slide in health care stocks. Merck fell 3.6% and Abbott Laboratories dropped 2.1%.

Rising bond yields gave banks a boost. Lenders rely on higher yields to set more lucrative interest rates on loans. JPMorgan Chase rose 2.5% and Bank of America gained 3.3%.

The yield on the 10-year Treasury rose to 1.64% from 1.55% late Friday in a sign that investors remain confident that the economy will continue growing. They also shifted money out of safe-play sectors like utilities and makers of consumer products.

Energy stocks climbed as the price of U.S. crude oil rose 2.4%. Oilfield services company Schlumberger jumped 5.9% and Halliburton gained 4.5%.

Benchmark crude oil rose $1.33 to settle at $57.85 a barrel. Brent crude oil, the international standard, gained $1.05 to close at $62.59 a barrel.

AT&T rose 1.5% after activist investment manager Elliott Management, which has a $3.2 billion stake in the telecom company, sent a letter to AT&T's board, noting that its stock has badly lagged the broader market over the past 10 years and urged it to shed businesses and trim costs. AT&T said it will review the proposals.

Freddie Mac and Fannie Mae each soared 42.8% after an appeals court overturned a ruling that supported the government's practice of collecting most of the profits generated by the mortgage finance giants.

Last week, the Trump administration unveiled a plan for ending government control of Fannie Mae and Freddie Mac. The companies nearly collapsed in the financial crisis 11 years ago and were bailed out by the government.

In other commodities trading Monday, wholesale gasoline rose 1 cent to $1.58 per gallon. Heating oil climbed 3 cents to $1.93 per gallon. Natural gas rose 9 cents to $2.59 per 1,000 cubic feet.

Gold fell $4.00 to $1,502.20 per ounce, silver rose 5 cents to $18.02 per ounce and copper fell 1 cent to $2.61 per pound.

The dollar rose to 107.16 Japanese yen from 106.89 yen on Friday. The euro strengthened to $1.1052 from $1.1028.

Major stock indexes in Europe also ended mixed Monday as economic growth concerns and Britain's potentially chaotic exit from the European Union weigh on investors. Stocks in Asia finished broadly higher.

___

AP Business Writer Damian J. Troise contributed.

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