“I think it’s really just a test to see if the equity market can advance in the backdrop of low energy prices,” said Jack Ablin, chief investment officer at BMO Private Bank.
Energy traded lower after earlier trying to shake off pressure from oil’s continued decline. Energy is down more than 20 percent year-to-date as the worst S&P performer.
Shares of Chipotle traded more than 3 percent lower to weigh on the consumer discretionary sector. The stock briefly plunged 6 percent to hit a fresh 52-week low after news the CDC is investigating another outbreak of a different E. coli strain at Chipotle.
WTI crude futures for January delivery settled up 1 cent at $34.74 a barrel after earlier dipping to $34.12, a fresh near-seven-year low. The contract expired Monday.
The February contract did not touch new lows, and settled down 25 cents at $35.81.
“It’s not like oil is directly responsible for why stocks dropped last week. The market is clearly concerned about global economic fundamentals,” said Pavel Molchanov, energy analyst at Raymond James. He expects oil to recover to around $60 a barrel in the second half of next year.
Brent hit $36.05 a barrel in early morning trade, its lowest since July 2004, and continued to trade just above that level.
The Dow transports held slightly higher with airlines leading advancers.
“This could be a dead cat bounce after the action on Friday. You could see some seasonality push it higher. … It all depends if we can hold that low from Friday,” said John Caruso, senior market strategist at RJO Futures.
U.S. stocks closed sharply lower Friday near session lows, wiping out gains for last week, as investors weighed low oil and economic data in the aftermath of the Federal Reserve’s rate hike Wednesday. Options expiration also contributed to volatility, with trade volume the second-highest of the year.
Both the S&P 500 and Dow Jones industrial average are still negative year-to-date, down more than 1.5 percent and 3 percent, respectively.
U.S. equities tried to kick off the shortened holiday week with gains. The U.S. stock market closes early Thursday, Christmas Eve, and is shut on Friday for Christmas Day.
“To me this just has to do with end of the year. Normal seasonal bounce. We’ll see if it can last,” said Adam Sarhan, CEO of Sarhan Capital.
“The market’s oversold. It’s overdue for a bounce. I think it’s more of a rotation going on underneath the surface because leadership is very narrow,” he said.
Analysts also noted some support from the weaker U.S. dollar, which traded slightly lower against major world currencies, with the euro above $1.09. The yen was near 121.08 yen against the greenback as of 3:34 p.m., ET.
Earlier, the U.S. dollar index extended losses after the Chicago Fed National Activity Index showed a decline to minus 0.30 in November from minus 0.17 in October.
No other major economic data was due Monday, while third-quarter GDP is expected Tuesday and personal income data is due Wednesday.
“Even though the (Federal Reserve) did move off the zero bound, it did so in light of an economy that shows little signs of accelerating,” Luschini said.
“On balance the Fed is unwilling to be as aggressive despite what their own dot plot would suggest,” he said.
Atlanta Fed President Dennis Lockhart said Monday the Federal Reserve’s promise of gradual rate hikes in coming months means the central bank will not raise rates at every meeting, according to a WABE radio report cited by Reuters.
Lockhart will not be part of the Federal Open Market Committee in 2016.
The S&P 500 traded up 5 points, or 0.24 percent, at 2,010, with telecommunications leading seven sectors higher and energy leading decliners.
The Nasdaq composite gained 18 points, or 0.36 percent, at 4,941.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded below 20.
Advancers were a step ahead of decliners on the New York Stock Exchange, with an exchange volume of 589 million and a composite volume of nearly 2.9 billion.
Gold futures for February delivery settled up $15.60 at $1,080.60 an ounce.
On tap this week:
8:30 a.m.: GDP Q3
9 a.m.: FHFA home prices
10 a.m.: Existing home sales
7 a.m.: Mortgage applications
8:30 a.m.: Durable goods
8:30 a.m.: Personal income
10 a.m.: New home sales
10 a.m.: Consumer sentiment
11 a.m.: Oil inventories
Stock market closes at 1 p.m.
8:30 a.m.: Initial claims
10:30 a.m.: Natural gas inventories
Christmas Day holiday
*Planner subject to change.