S&P 500 flat as investors weigh First Republic rescue ahead of Fed decision

Investing.com -- The S&P 500 struggled for direction Monday as investors kept their powder dry ahead of the Federal Reserve decision later this week and weighed the government takeover and sale of First Republic to JPMorgan. 

The S&P 500 was flat, the Dow Jones Industrial Average fell 0.1%, or 27 points lower, and the Nasdaq slipped 0.1%.

JPMorgan Chase&Co (NYSE:JPM) rose more than 2% after bolstering its market share as it emerged as the preferred suitor to purchase First Republic Bank after the regional lender was taken over by regulators. The move, which came after First Republic Bank's attempt to privately find a rescue deal failed, was cheered by some as it avoids a messy collapse that many feared would spark contagion in the banking system.

Still, some on Wall Street questioned whether the rescue of First Republic marked the end of the wobble in banking as the ongoing inversion yield curve weighs on the lending margins.

“It’s very difficult for me to see this issue resolved with an inverted yield curve and with the reserve base, that all deposits in money rest on, continuing to sink,” Michael Darda of Roth MKM Partners told Bloomberg.

Energy stocks, however, were a drag on the broader market, paced by a decline in Exxon Mobil Corp (NYSE:XOM) after Goldman Sachs downgraded the oil major to Neutral from Buy, pointing a “less compelling valuation…following multi-year outperformance.”

Hess Corporation (NYSE:HES), Halliburton Company (NYSE:HAL), and EQT Corporation (NYSE:EQT) were the other energy stocks among the biggest losers on the day.

Treasury yields, meanwhile, held the bulk of their gains with just a day to go until the Federal Reserve kicks off its two-day meeting.  

The Fed is widely expected to hike rates by 0.25% on Wednesday, so investor focus will shift to signaling around a pause in June.

“We expect the Committee to signal that it anticipates pausing in June but retains a hawkish bias, stopping earlier than it initially envisioned because bank stress is likely to cause a tightening of credit,” Goldman Sachs said in a note.

Tech traded mixed ahead of Apple Inc's (NASDAQ:AAPL) earnings later this week that could likely shape the direction for big tech.

“With Big Tech showing impressive resiliency during earnings season the last few weeks now the baton is handed to [Apple CEO] Cook as investors all look towards Apple's Thursday night print/guidance with the tech finale on 1Q,” Wedbush said in a note.

Rising semiconductor stocks also helped keep tech above the flatline following an 8% surge in ON Semiconductor Corporation (NASDAQ:ON) as the chipmaker reported quarterly results that topped Wall Street estimates.