Wall Street shares closed sharply lower Tuesday, unwinding the previous day’s Fed-fuelled rally, as oil prices dropped on shaky outlook for Asian oil demand.
A day after the S&P 500 clocked its best day in two months after dovish Fed officials’ comments, the benchmark index fell 1.5% to 2,127 led by a sell-off in energy shares, which finished the day 2.9% lower.
Brent crude, the global oil benchmark, settled 2.5 per cent lower at $47.10 a barrel, while West Texas Intermediate, the US crude marker, settled 3 per cent lower at $44.90 a barrel. The decline in crude was sparked by a report from the International Energy Administration that said that the global oil glut would persist into 2017.
The S&P Midcap 400 closed down 1.9% at 1517 while the S&P Smallcap 600 lost 1.8% to 734.
Midsession
US stocks remained under pressure at midsession on Tuesday as oil prices sagged in the wake of International Energy Agency data suggesting “wobbling” demand outlook from Asia.
Monday’s rally after a trio of Fed officials offered a dovish tone in the last commentary ahead of the blackout period ahead of the Sept 21 FOMC meeting, unwound on Tuesday as investors turned to the plight of oil demand and how to combat the two-year supply glut.
The S&P 500 market bellwether was down 1.5% at 2,126, while the S&P Midcap 400 was down 1.9% at 1,516 and the S&P Smallcap 600 lost 1.9% to 733.
Energy companies dominated the fallers on New York tickers after the US oil benchmark West Texas Intermediate shed 2.8% to $45.01.
Having opened on the backfoot, Wall Street tickers extended losses through the early half of the session.
Open
US stocks opened sharply weaker on Tuesday, giving back some of the Fed-induced rally seen the previous session on reduced risk of a September rate hike.
The hardy perennial of oil prices was back on centre stage as the US benchmark WTI sank by 1.5% to $45.62 a barrel after the International Energy Agency on Tuesday slashed its forecast for global oil demand this year amid “wobbling” Asian demand.
The S&P 500 market bellwether was down 1% to 2,137 and led by a chorus of oil stocks, no surprise.
Top decliner was Chesapeake Energy (NYSE:CHK) down 8% to $7.41, followed by NRG Energy (NYSE:NRG) down 6.5% to $11.21, Freeport McMoRan (NYSE:FCX) down 6.1% to $10.41, Murphy Oil Corp down 5.8% to $10.45, Marathon Oil (NYSE:MRO) down 5.9% to $14.57, Transocean (NYSE:RIG) down 4.3% to $9.38, Noble Energy (NYSE:NBL) down 4.3% to $35.08, and Devon Energy Corp (NYSE:DVN) down 4.3% to $41.28.
The S&P Midcap 400 was 0.7% lower at 1,535 with Sm Energy Co (NYSE:SM) one of he top fallers of 6.1% to $34.11 and Wpx Energy (NYSE:WPX) down 5.8%$12.20.
The S&P Smallcap 600 lost 0.7% to 742.
Speculation that the Fed could raise rates as soon as next week sparked a sharp selloff in stocks and government bonds on Friday, but those concerns appeared to abate after three Fed officials said on Monday there is no hurry to move.
Expectations that interest rates would remain lower for longer have helped fuel a rally in a broad range of financial assets in recent months, from US stocks to emerging-market bonds.
Pre-Open
Wall Street shares are poised for a lower start as traders mull over what the Fed may do later this month and after strong gains yesterday.
In what is probably best described as a see-saw action, the S&P 500 rose 1.47% on Monday , or around 31 points to finish at 2,159.
That came after it recouped a chunk of its Friday sell-off, which saw the benchmark index log its worst one-day drop since the Brexit poll.
Meanwhile, the Dow Jones closed yesterday a whopping 239 higher, or 1.32% at 18,325, while the tech heavy Nasdaq added around 85, or 1.68% to 5,211.
In futures trading today, the Dow Jones is down 108 points; the S&P500 lost 14, while the Nasdaq shed over 30 points.
Opinion is beginning to be split about whether the US central bank will or will not raise rates on September 21 after Fed speakers have sent mixed messages.
Meanwhile, drop in oil prices has done little to improve sentiment as the International Energy Agency warned of slowing growth in demand.
US crude, or West Texas Intermediate, is down 2.18% at the time of writing, at US$45.29 per barrel.
Weight Watchers (NYSE: WTW) shares shed 2.61% in after hours trading after it revealed the chief executive James Chambers is stepping down after three years.