The Dow industrials rallied in the final hour of trading, closing in positive territory and capping a day of wide swings.
The Dow Jones Industrial Average gained 52 points to 16399, after swinging between gains and losses throughout the session and falling as much as 114 points in intraday trade.
Oil prices remained firmly in negative territory, keeping shares of energy companies lower. The S&P 500 energy sector index lost 2.1%, as U.S. oil prices slumped 5.3% to $ 31.41 a barrel, its lowest level since 2003.
The moves follow a steep selloff in stocks last week that marked the worst start of the year on record for major U.S. indexes. The Dow dropped 6.2% on deepening concerns over China’s growth pace and volatility in its financial markets, as well as the persistent slide in oil prices.
Many investors are bracing for higher levels of volatility in stocks in the weeks ahead. Many investors are holding off on placing big trades ahead of fourth-quarter earnings reports from many U.S. companies due in the weeks ahead, traders said.
The S&P 500 rose less than 0.1%, while the Nasdaq NDAQ 2.63 % Composite declined 0.1%.
Small-company stocks remained lower, with the Russell 2000 index of small-cap stocks falling 0.4%. The index briefly touched bear market territory earlier in the session, denoted by a decline of 20% or more from a recent high.
“Everyone is so consumed with the global macro picture,” said Jesse Lubarsky, equities trader at Raymond James in New York.
On Monday, many investors are holding off on placing big trades ahead of fourth-quarter earnings reports from many U.S. companies due in the weeks ahead, traders said. The fourth-quarter earnings season unofficially kicks off Monday with a report from aluminum maker Alcoa Inc., AA -0.87 % due after the closing bell.
But expectations are low for many companies, whose profits have been curbed by a combination of sliding oil prices, a strong dollar and slowing Chinese growth. Analysts expect S&P 500 companies to report a 5.5% decline in quarterly profits, according to FactSet, as they were weighed down by steep earnings declines in the energy and materials sectors.
“If you bought the dip in the last month you’re hurting,” said Tom Carter, managing director at JonesTrading. “In two or three weeks we will be determining the new equilibrium, but not now.”
Mining stocks fell as coal company Arch Coal ACI -30.93 % filed for chapter 11 protection. Freeport-McMoRan lost 20%, Consol Energy CNX -8.97 % fell 9%, while Peabody Energy BTU -20.09 % declined 20%.
The Stoxx Europe 600 lost 0.3%, reversing earlier gains. Shares of Shire SHPG -8.94 % PLC fell 8.2% after the Dublin-based pharmaceutical company agreed to buy cancer-drug maker Baxalta Inc. BXLT -2.27 % for $ 32 billion, the latest tie-up in a rapidly consolidating health-care sector.
The Shanghai Composite Index fell 5.3% amid fears that Chinese authorities are unable to stem the turmoil in the Asian giant’s financial markets and a slowdown in the broader economy.
Some investors said China has posted little new information about its economy that would justify the market’s reaction.
“China’s stock market doesn’t have huge ramifications for most international investors,” said David Stubbs, global market strategist at J.P. Morgan Asset Management, which manages roughly $ 1.7 trillion in assets.
Despite last week’s sharp losses, Mr. Stubbs said he remains invested in stocks in the U.S. and Europe where recent economic data has been mostly positive.
Amid the jitters, Hong Kong’s Hang Seng HSNGY -0.28 % Index declined 2.8% Monday, hitting its lowest level in more than two years. Australia’s S&P/ASX 200 lost 1.2%. Japan’s Nikkei Stock Average was closed for a holiday.
In other markets, the euro slipped 0.5% against the dollar to $ 1.0878. South Africa’s rand hit record lows.
Gold fell 0.1% to $ 1096.50 per troy ounce. Treasury prices fell, pushing the 10-year yield up to 2.166% from 2.131% on Friday.
“What China gave, it’s now taking away from emerging markets and commodities,” said Yossi Dayan, head of markets at BCS, an independent broker on the Russian exchange. “All the supply built to feed Chinese demand is not finding a home,” he said.
Dirk Thiels, head of investment strategy at KBC Asset Management, said the nervousness about China’s economy is only adding to the underlying fragility of financial markets at the start of the year.
“People are worried this economic growth we’ve seen strongly in Europe and in the U.S. was built on very cheap money, and now that things are changing, [as the Federal Reserve raises rates] that might not last for a long time,” he said.
—Saumya Vaishampayan and Corrie Driebusch contributed to this article.
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