Wall Street opens lower as oil prices continue to weigh

Oil prices were down 5% as hopes for a deal between OPEC and Russia on output cuts faded with Goldman Sachs saying it was 'highly unlikely'

Wall Street opened lower on Tuesday as falling oil prices weighed on energy shares.

Oil prices were down 5 percent as hopes for a deal between OPEC and Russia on output cuts faded with Goldman Sachs saying it was "highly unlikely".

Shares of Exxon fell 1.7 percent after the oil major reported a 58 percent drop in quarterly profit. The stock weighed the most on the S&P 500 energy index.

Consumer savings from cheap gasoline have failed to translate into higher spending. U.S. consumers are opting to save or pay down debt rather than buying big-ticket items.

Investors have been concerned about a China-led global economic slowdown and the pace of rate hikes by the U.S. Federal Reserve. The S&P 500 has fallen more than 5 percent this year.

"The reaction of U.S. equities to oil, China and other external factors tells us more about the internal status of the market," said Scott Clemons, chief investment strategist at Brown Brothers Harriman in New York.

"Stocks are slightly overvalued even with the recent pullback and what we need is a rebound in corporate earnings."

Clemons said corporate earnings will improve when there is a slight acceleration in wages and a subsequent pickup in consumer spending.

Fourth-quarter S&P 500 earnings are expected to have fallen 4.1 percent from a year earlier, according to Thomson Reuters data. The estimate has improved since last week.

Big names such as Yahoo and Chipotle are scheduled to report results after the close of market.

At 9:36 a.m. ET (1436 GMT) the Dow Jones industrial average was down 201.62 points, or 1.23 percent, at 16,247.56, the S&P 500 was down 21.47 points, or 1.11 percent, at 1,917.91 and the Nasdaq Composite index was down 38.16 points, or 0.83 percent, at 4,582.21.

All 10 major S&P sectors were lower with the energy index's 2.32 percent loss leading the decliners.

Investors are keeping a close eye on the U.S. election cycle, with Senator Ted Cruz winning the Republican caucus in Iowa on Monday and Democrat Hillary Clinton narrowly edging out Senator Bernie Sanders.

Clemons said it is too early for the market to factor in the U.S. election but as specific policy proposals firm up, the market will take note.

Alphabet was up 3.6 percent at $798.30, a day after the internet giant's quarterly profit handily beat estimates. Alphabet surpassed Apple as the most valuable U.S. company. Apple was down 0.5 percent at $95.98.

Michael Kors was up 17.3 percent at $47.59 after the handbag and accessories maker reported a smaller-than-expected decline in quarterly sales.

Mattel was up 9.4 percent at $29.17 after the toy maker reported a surprise rise in quarterly net sales, its first increase in over two years.

Declining issues outnumbered advancing ones on the NYSE by 2,386 to 327. On the Nasdaq, 1,848 issues fell and 444 advanced.

The S&P 500 index showed two new 52-week highs and four new lows, while the Nasdaq recorded nine new highs and 27 new lows.