U.S. stocks traded sharply lower Tuesday as investors looked ahead to next week’s Federal Reserve meeting while keeping an eye on falling oil prices.
“The fact of the matter is the market is in a downward cycle,” said Peter Cardillo, chief market economist at First Standard Financial. “With the lack of macro news, the market is trapped in a sea of worry right now.”
The Dow Jones industrial average fell more than 200 points, with Goldman Sachs contributing the most losses. The S&P 500 dropped 1 percent, with energy fell more than 2 percent, leading all sectors lower.
“Yesterday’s rebound did not improve the posture of our short-term indicators, which remain supportive of the pullback. The SPX has confirmed a breakdown below its 50-day moving average in a reflection of weak short-term momentum,” said Katie Stockton, chief technical strategist at BTIG. “More climactic selling is needed to bring our market internal measures to oversold extremes, therein signaling a tradable low.”
The Nasdaq about 0.8 percent, despite a near 3 percent gain in Apple.
“The tone of the market is as uncertain as it’s been all year,” said Art Hogan, chief market strategist at Wunderlich Securities. “Up until yesterday, we knew what every Fed official was having for breakfast, lunch and dinner.”
“The problem with this week is now we’ve shut that down,” he said.
Fed officials are now a quiet period after members of the central bank’s policymaking committee made dovish remarks on U.S. monetary policy on Monday.
Lael Brainard, a Fed governor, said it would be wise to keep rates low despite continuous economic growth. Dennis Lockhart, Atlanta Fed president, said in a separate speech that a “serious discussion” on raising rates is warranted at the central bank’s upcoming meeting.
U.S. equities shot higher on Monday amid Brainard and Lockhart’s remarks, with the three major indexes closing more than 1 percent higher. On Friday, Boston Fed President Eric Rosengren delivered surprisingly hawkish remarks, sending U.S. stocks lower.
“The buy the dip mentality was strong [Monday]. However, we stand by our call that the recent drop in the market will not ultimately prove to be a buying opportunity just yet,” said Nick Raich, CEO at The Earnings Scout. “As companies begin to report 3Q 2016 earnings, our research indicates the rate at which 4Q 2016 EPS estimates come down is likely to accelerate to the downside given the current high expectations.”
Investors have been closely eyeing every piece of economic data and parsing through every speech made by fed officials, trying to find clues about what the central bank’s decision on monetary policy will be.
The Fed is scheduled to meet next Tuesday through Wednesday. Market expectations for a Fed rate hike next week were 15 percent Tuesday morning, according to the CME Group’s FedWatch tool.
There are no major economic data due Tuesday.
“An empty economic calendar for the next forty-eight hours should also help alleviate some of the lingering skittishness. Most importantly, the FOMC has entered its quiet period with the final communication from a Committee member unambiguously suggesting that the central bank would be served better by maintaining the status quo when congregating next Wednesday,” Jeremy Klein, chief market strategist at FBN Securities, said in a note to clients.
Investors also kept an eye on falling oil prices Tuesday. West Texas Intermediate futures fell more than 2 percent to $45.11 per barrel after the International Energy Agency said the rebalancing in the oil marketwill take longer than expected. The American Petroleum Institute is expected to release its forecast for U.S. oil inventories after the close.
U.S. Treasurys slipped, with the two-year note yield near 0.78 percent and the 10-year note yield around 1.68 percent. Investors will watch out for a 30-year bond auction, scheduled for 1 p.m. ET, a day after lackluster sales of three and 10-year notes on Monday.
The U.S. dollar advanced against a basket of currencies, with the euro near $1.123 and the yen around 102.36.
The Dow Jones industrial average fell 188 points, or 1.03 percent, to 18,137, with Verizon leading decliners and Apple the only advancer.
The S&P 500 slid 25 points, or 1.17 percent, to trade at 2,133, with energy leading all sectors lower.
The Nasdaq dropped 50 points, or 0.9 percent to 5,161.
About eight stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 166 million and a composite volume of 648 million in midmorning trade.
Gold futures for December delivery rose $2.70 to $1,328.30 per ounce.
On tap this week:
*Planner subject to change.
1:00 p.m. 30-Yr Bond Auction
2:00 p.m. Federal budget
8:30 a.m. Import prices
8:30 a.m. Initial claims
8:30 a.m. Retail sales
8:30 a.m. PPI
8:30 a.m. Empire State survey
8:30 a.m. Philadelphia Fed
8:30 a.m. Current account
9:15 a.m. Industrial production
10:00 a.m. Business inventories
8:30 a.m. CPI
10:00 a.m. Consumer sentiment
4:00 p.m. TIC data