Crude oil futures plague the energy group thereby dragging on overall sentiment
U.S. stocks finished lower on Tuesday, 20 June 2017 as investors dumped energy shares after crude-oil prices sank into bear-market territory. The major averages opened Tuesday's session modestly lower with the energy sector showing relative weakness. Crude oil futures plagued the energy group, dropping as low as $42.95 per barrel, as concerns about excess supply, and a deteriorating technical picture, continued to weigh on the commodity.
The Dow Jones Industrial Average fell 61.85 points, or 0.3%, to end at 21,467.14 after touching an intraday record of 21,535.03. The Nasdaq Composite Index slid 50.98 points, or 0.8%, to close at 6,188.03. The S&P 500 dropped 16.43 points, or 0.7%, to close at 2,437.03, with nine of the 11 main sectors trading lower. Chevron fell 0.9%, while Verizon Communication was off 1.4%.
The tech-heavy index has moved sharply lower over the past two weeks on concerns the high-value tech industry is in a bubble. The energy sector was down 1.3%, topping the losers.
Crude oil prices marked its lowest finish since August, on Tuesday, 20 June 2017 with prices sinking into bear-market territory as investors remained concerned that rising output from the U.S. and Libya will offset OPEC-led production cuts. Meanwhile, natural-gas prices got a modest boost as traders eye two tropical storms that have formed in the Atlantic.
July West Texas Intermediate crude declined by 97 cents, or 2.2%, to settle at $43.23 a barrel on the New York Mercantile Exchange on the contract's expiration day. Prices also ended down 20.6% from 2017's year-to-date high above $54putting them in bear-market territory. Brent crude for August delivery on London's ICE Futures exchange slid 89 cents, or 1.9%, to $46.02 a barrel. Prices ended at their lowest since mid November.
August crude which became the front-month contract at the settlement, lost 92 cents, or 2.1% to $43.51 a barrel.
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Libya, which is exempt from the output-cut accord led by the Organization of the Petroleum Exporting Countries, has ramped up production to 900,000 barrels a day, adding further pressure on the market that is awash with surplus.
Additionally, concerns about higher U.S. output kept prices under pressure. Various energy-monitoring bodies, such as the International Energy Agency, of late have projected U.S. crude output will continue rising through next year-increases which stand to negate the bulk of the continuing OPEC-led cuts.
Shares of oil companies were among the worst performers. Transocean shed 4.2%, Marathon Oil declined 3.4% and Hess was down 3.2%.
The closely watched dollar index rose 0.3%, providing a headwind for commodities priced in the currency. A stronger dollar tends to make assets pegged to the buck more expensive to buyers using other monetary units.
Economic and interest-rate policy uncertainty will continue to hold sway over metals and currency trading. This week's economic data releases include leading economic indicators Thursday and Markit manufacturing PMI Friday.
Among a long lineup of Fed speakers this week, Boston Fed President Eric Rosengren said Tuesday that low interest rates do pose financial stability concerns that central bankers and the private sector must take seriously. Last week, Fed Chairwoman Janet Yellen laid out a plan to shrink the central bank's massive $4.5 trillion balance sheet, as the Fed also raised interest rates.
Tuesday's lone economic report, first quarter Current Account Balance--came in better than expected, showing a deficit of $116.8 billion (consensus -$123.4 billion). The fourth quarter deficit was revised to $114.0 billion from $112.4 billion.
On Wednesday, investors will receive the weekly MBA Mortgage Applications Index and May Existing Homes Sales (consensus 5.52 million). The two reports will be released at 7:00 ET and 10:00 ET, respectively.
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