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New week, same slog for Wall Street as stocks little changed

Adam Shell
USA TODAY

U.S. stocks kick off the new week with little direction as Wall Street continued to weigh the impact of coming interest rate hikes and continued sluggish pace of U.S. economy and corporate earnings.

Trader Robert Oswald works on the floor of the New York Stock Exchange, Wednesday, May 18, 2016.  (AP Photo/Richard Drew)

The broad Standard & Poor's 500 stock index, which last week rose 0.3% to end a three-week losing streak, fell 0.2%. The Dow Jones industrial average, which is coming off its fourth straight down week, lost 8 points, or less than 0.1%. And the technology-packed Nasdaq was down 0.1%.

Investors are still coming to grips with the prospect of an interest rate increase from the Federal Reserve at next month's meeting and the prospect for more than one rate increase in 2016. Wall Street is still at odds with the Fed in terms of rate expectations, and have not yet priced in either a June hike or multiple hikes in 2016.

Heading into the week, the broad U.S. stock market was up 0.4% for the year.

Wall Street will be eyeing more incoming economic data and the tail-end of first-quarter earnings reports. While Monday is quiet, investors will get data on April new home sales on Tuesday, as well as earnings results from auto parts retailer AutoZone and TV and electronics retailer Best Buy.

The first-quarter earnings season, while not as bad as feared, was weak. Companies in the S&P 500 are on track to post an earnings contraction of 5.2%, according to Thomson Reuters. The good news is second-quarter profit warnings have only outpaced upbeat guidance by a ratio of 2.2 to 1, which is far better than more than 4 warnings for every positive earnings preannouncement in the first quarter.

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Investors will also also digest fresh commentary from Fed speakers, just days after minutes of the U.S. central bank's April were released and talk of a coming rate hike gained credence from the Fed.

John Williams, president of the Federal Reserve Bank of San Francisco, said Sunday that the coming presidential election would not prevent the Fed from hiking rates. And Williams, a non-voting Fed member, said earlier today at the Council of Foreign Relations.that the Fed could hike rates two to three times this year and maybe three to four times in 2017.

Wall Street also awoke to deal news. German-based pharmaceutical and chemical giant Bayer went public with its $122 per share cash offer for U.S.-based agricultural giant Monsanto, a deal valued at $62 billion that would form the world's biggest agricultural seed supplier.

Chemical firm Bayer makes $62B offer for Monsanto

In Europe, shares were mostly lower as a euro manufacturing gauge edged lower and hit a 16-month low. The broad Stoxx Europe 600 index was down 0.4%.

Shares were mixed in Asia, with Japan's Nikkei 225 falling 0.5%, stocks in Hong Kong giving up 0.2% and equities in mainland China rising 0.6%.

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