The Dow Jones industrial average traded about 150 points lower, with Boeing and Goldman Sachs contributing the most to declines. The Dow briefly fell more than 250 points in morning trade after some disappointing economic data.
Financials traded about 1.5 percent lower as the greatest laggard in the S&P 500. The S&P struggled to hold the psychologically key 1,900 level.
The Dow transports declined more than 2.5 percent in morning trade, with Avis Budget leading decliners.
The S&P 500 declined more than 1.47 percent to fall below the psychologically key 1,900 level, with energy and financials the greatest laggards. Utilities was the only gainer.
“The market got overbought up until yesterday and the weakness in oil, the weakness in the yuan, the weakness in European banks is just a reminder the overarching concerns people have are still there,” said Peter Boockvar, chief market analyst at The Lindsey Group.
However, U.S. stocks pared losses after the Energy Information Agency said U.S. oil barrels rose by 3.5 million, lifting WTI futures to trade back above $31 a barrel.
“When you add it all together, weak energy, huge currency moves, and weak economic data, those are going to lead to this kind of sell-off,” said Art Hogan, chief market strategist at Wunderlich Securities.
U.S. crude oil futures declined Tuesday after Saudi Oil Minister Ali al-Naimi said production cuts won’t happen, although producers will hopefully meet in March to negotiate an output freeze. Oil extended losses after the settle late Tuesday following news that domestic crude stockpiles grew by more than twice expectations, according to American Petroleum Institute data cited by Reuters.
European stocks were down over 2.5 percent in morning trade ET.
Overnight, the Chinese yuan midpoint fix was also set slightly weaker against the dollar. However, the Shanghai composite ended about 0.9 percent higher while most Asian equities ended lower.
The major U.S. averages extended losses slightly after the Markit Flash February report on services PMI came in at 49.8, down sharply from 53.2 in January and a touch below the key 50.0 level.
While traders attributed the decline to the Markit services PMI, they said there was not a fundamental reason for the drop given the light trade volume and the relative newness of the indicator.
New home sales for January hit 494,000, below the expected 520,000.
Treasury yields ticked lower, with the 2-year yield at 0.70 percent and the 10-year yield at 1.67 percent.
The U.S. dollar index trimmed gains to hold a touch higher against major world currencies, with the euro at $1.1012 and the yen at 111.33 against the greenback. Pound sterling continued to weaken against the dollar amid concerns over the U.K.’s possible departure from the European Union.
“The percentage moves you’re seeing in the British pound are disruptive for equity markets; the percentage moves your seeing in the yen are disruptive,” Wunderlich’s Hogan said.
Read More: Oil, Fed in focus for Street
Investors will also be watching for more hints on future policy at the U.S. Federal Reserve and whether it will continue its tightening process this year.
Richmond Federal Reserve President Jeffrey Lacker said in a Reuters report Wednesday there is still a case for raising interest rates further, a sign the central bank’s internal debate over rate hikes remains a live one.
St. Louis Fed President James Bullard is due to speak after the closing bell at 7.00 p.m. ET.
Fed Vice-Chairman Stanley Fischer said late Tuesday that Fed officials “simply do not know” what course of action they would take at their next meeting three weeks from now, adding that it was too early to assess the impact of current market volatility.
U.S. stocks closed lower Tuesday, as hopes of an oil production cut were dashed and after a miss in the consumer confidence index.
In morning trade, the Dow Jones industrial average fell 190 points, or 1.16 percent, to 16,239, with Boeing leading decliners and United Technologies the only advancer.
The S&P 500 declined 20 points, or 1.09 percent, to 1,900, with financials leading all sectors lower.
The Nasdaq composite fell 54 points, or 1.21 percent, to 4,448.
About four stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 249 million and a composite volume of 1.067 billion in morning trade.
Crude oil futures for April delivery fell $1.19 to $30.68 a barrel on the New York Mercantile Exchange. Gold futures for April delivery gained $22.10 to $1,244.90 an ounce.
—CNBC’s Fred Imbert contributed to this report
On tap this week:
Earnings: HP, L Brands, NetEase, Salesforce.com, Transocean
10:30 a.m.: Oil inventories
1 p.m. $34 billion five-year notes
7 p.m. St. Louis Fed President James Bullard
G-20 finance ministers meet in Shanghai
Earnings: AB InBev, Bayer, Apache, Best Buy, Campbell Soup, Domino’s Pizza, Kohl’s, Chico’s FAS, Sears Holdings, SeaWorld, Baidu, Autodesk, Gap, Intuit, Kraft Heinz, Herbalife, Live Nation Ent., Noodles & Co., Weight Watchers
8:15 a.m. Atlanta Fed President Dennis Lockhart
8:30 a.m. Initial claims; durable goods
9 a.m. FHFA home prices
10:30 a.m.: Natural gas inventories
11 a.m.: Kansas City Fed Manufacturing Index
12 p.m. San Francisco Fed President John Williams
1 p.m. $28 billion seven-year notes
G-20 meets in Shanghai
Earnings: J.C. Penney, Foot Locker, Sotheby’s, Sempra Energy, AmericanTower, Centerpoint, Liberty Media, Telefonica, Rowan Cos
8:30 a.m. Real GDP Q4 (second reading); international trade
8:30 a.m.: Personal income, consumer spending
10 a.m. Consumer sentiment
Earnings: Berkshire Hathaway
*Planner subject to change.
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