Goldman Sachs lowered its outlook for crude prices and a report on business confidence in Germany, Europe's largest economy, showed a sixth straight month of declines.
KEEPING SCORE: The Standard & Poor's 500 index slipped five points, or 0.2 percent, to 1,960, as of 12:15 p.m. on Monday. The Nasdaq composite sank seven points, or 0.2 percent, to 4,476, while the Dow Jones industrial average dipped nine points, or 0.1 percent, to 16,794.
OIL SLIPPING: Mounting evidence of rising supplies and weak demand continued to weigh on the price of crude oil, which has dropped from a high of nearly $107 a barrel in June. Goldman Sachs was the latest Wall Street bank to lower its forecast for prices in a report out Sunday, saying OPEC was unlikely to cut exports to try and push prices back up. Benchmark U.S. crude was down 79 cents to $80.24 in New York trading. Brent crude, used by many U.S. refineries to set prices, was down $1.20 to $84.93 in London.
OIL STOCKS: The slide in crude tugged down the stocks of oil and gas producers and the companies that provide services for the industry. Exxon Mobil and Chevron fell 1 percent, and Halliburton's 7 percent drop was the worst in the S&P 500.
MERCK STRUGGLES: A large group of U.S. companies are reporting results this week. Merck on Monday said its earnings fell in the third quarter as pharmaceutical sales sank 4 percent. The drug company also scaled back its most optimistic forecasts for full-year profits and sales. The news knocked Merck's stock down $1.40, or 2 percent, to $56.20.
NOT SO BAD: Last week, the stock market turned in its best performance in nearly two years. That helped the S&P 500 recover from a four-week slump. The benchmark index had lost almost 6 percent by mid-October, but is now down 0.6 percent for the month.
CHOPPY TRADING: What's behind the recent turbulence? David Joy, chief market strategist at Ameriprise Financial, thinks it's tied to actions by the world's central banks. The Federal Reserve is winding down its $4 trillion bond-buying program -- known as QE -- this month. And many investors expect the European Central Bank to launch its own program on a similar scale.
"We're approaching the end of QE, and I think the market is going through a period when people are asking how important is it to lack that support," Joy said. "The open question is how robust is the economy you're left with. Is it strong enough to sustain earnings growth?"
STRESSFUL TESTS: The European Central Bank said that 13 of Europe's 130 biggest banks failed a review of their finances and need an extra 10 billion euros ($12.5 billion) to strengthen themselves. The bank that did worst in the tests, Italy's Monte dei Paschi di Siena, saw its shares plunge 18 percent. Those that passed, however, traded higher.
QUOTE: "The stress tests showed healthy balance sheets in most major institutions while those found with capital gaps are mostly contained in periphery nations," said Desmond Chua, of CMC Markets, in a commentary.
GERMAN DATA: European stock markets swung lower later in the day when Germany's Ifo index of business confidence showed a fall for the sixth consecutive month in October, the latest in a string of disappointing data. Some analysts suggested lower oil prices and a weaker euro should help industrial companies and exporters and keep the country from falling into a recession.
EUROPE'S MARKETS: Germany's DAX lost 0.9 percent, while France's CAC 40 dropped 0.7 percent. Britain's FTSE 100 dipped 0.4 percent.
CURRENCIES: The euro rose to $1.2677 from $1.2670 late Friday. The dollar fell to 107.86 yen from 108.16 yen.
ASIA'S DAY: Shares were mixed in Asia. Japan's Nikkei 225 stock index climbed 0.6 percent, and South Korea's Kospi rose 0.3 percent. Hong Kong's Hang Seng fell 0.7 percent.
FED MEETING: Investors are focusing on this week's Federal Reserve policy meeting for confirmation the U.S. central bank is ending its bond-buying program. That policy has kept long-term interest rates low to encourage borrowing and spending but also boosted stocks as investors sought higher returns. Recent mixed signals about the strength of the U.S. recovery prompted speculation that the Fed might let the program continue for longer, but many analysts consider that outcome unlikely.