All three major Wall Street indexes closed lower on Tuesday after rallying last week as volatile oil markets kept the focus on soaring inflation and investors reacted to hawkish comments from a head of the Federal Reserve.
After outperforming earlier in the session, the S&P energy sector lost ground after a report that some producers were exploring the idea of suspending Russia’s participation in the OPEC+ production deal.
Federal Reserve policy was also a priority for investors as US President Joe Biden and Fed Chairman Jerome Powell met on Tuesday to discuss inflation, which Biden said ahead of the meeting was his ” top priority”.
This was after Fed Governor Christopher Waller said on Monday that the US central bank should be prepared to raise rates by half a percentage point at every meeting from now until the inflation is firmly under control.
“The market is trying to determine the endgame for the Fed,” said Jack Janasiewicz, portfolio manager at Natixis Investment Management solutions.
And while lower commodity prices would be good news for equities over the longer term, the impact of the OPEC and Russia report on the energy sector may have spooked the market a bit in broadly Tuesday.
“That’s the kind of thing that pisses off the market,” Janasiewicz said. “When we started, the sector that took us the highest was energy.”
At the end of the session, the largest decline among the S&P’s 11 major industrial sectors was energy, down 1.6%.
The sector’s only gainers were Consumer Discretionary, up 0.8%, with Amazon.com the S&P’s biggest gainer from a single stock on the day, and Communication Services, up 0. .4%, Google being the second largest contributor to the S&P.
The Dow Jones Industrial Average fell 222.84 points, or 0.67%, to 32,990.12, the S&P 500 lost 26.09 points, or 0.63%, to 4,132.15 and the Nasdaq Composite fell 49.74 points, or 0.41%, to 12,081.39.
The three indices had rallied last week to snap a decades-long losing streak.
With Tuesday’s decline, the S&P and Dow remained essentially unchanged in May. The Nasdaq posted a monthly decline of 2%.
“There’s too much concern right now for the markets to make a sharp V-bottom,” said Carol Schleif, deputy chief investment officer at BMO Family Office, who sees stocks trading sideways for some time due to uncertainties, particularly Russia-Ukraine. war, the global economy and inflation, and Fed policy.
“Energy prices are part of that, because at the margin these have a real impact on people’s willingness to spend. People are really noticing the higher prices at the grocery store,” she said.
Earlier in the day, data showed U.S. consumer confidence eased slightly in May amid persistently high inflation and rising rates, while a separate reading showed that growth in commodity prices homes in the United States hit record highs in March.
Other key data due this week are monthly non-farm payrolls figures for labor market indices.
U.S.-listed shares of Yamana Gold Inc soared 3.7% after South African miner Gold Fields Ltd agreed to buy the Canadian miner in a 6.7 all-stock deal billions of dollars.
Dexcom Inc closed 3% higher after the glucose monitoring system maker denied a report of merger talks with insulin pump maker Insulet Corp.
Falling issues outnumbered rising ones on the NYSE by a ratio of 1.82 to 1; on the Nasdaq, a 1.44-to-1 ratio favored decliners.
The S&P 500 posted four new 52-week highs and 29 new lows; the Nasdaq Composite recorded 53 new highs and 58 new lows.
On US exchanges, 15.52 billion shares changed hands on Tuesday, against a 20-day moving average of 13.25 billion.