Equities suffer a sharp sell-off amid a slump in energy shares
US stocks ended substantially lower at Wall Street on Tuesday, 13 September 2016. The Dow Industrials on Tuesday finished nearly 260 points lower as equities suffered a sharp sell-off amid a slump in energy shares and uncertainty about the Federal Reserve's plans for monetary policy. A decline in crude-oil prices, as the International Energy Agency warned of slowing growth in demand, also helped to fuel the downdraft for the stock benchmarks.
The Dow Jones Industrial Average closed 258.05 points, or 1.4%, lower at 18,066.89, and was down nearly 300 points at its lowest. The Nasdaq Composite Index fell 56.63 points, or 1.1%, at 5,155.25. The S&P 500 index gave up 32.02 points, or 1.5%, at 2,127.02.
The steep drop of Dow marked the third straight triple-digit move for the blue-chip gauge, following a period of unnatural calm on Wall Street. Only Apple shares ended in positive territory among Dow components, rising 2.6%. Shares of Chevron and Exxon Mobil down 2.4%, led decliners.
All 10 sectors of the S&P 500 ended lower, led by energy. All of the components of the energy sector traded in the red, with Chesapeake Energy closing down 8.3% to top its worst performers.
Equity indices began the session under pressure as investors continued to mull over central bank policy here at home and from overseas. Fed Governor Lael Brainard reaffirmed a dovish stance in the prior session, stating that the case for preemptive tightening has become less compelling. In response, the implied probability of a rate hike at the September meeting fell to 15.0% from 24.0% at the start of the week.
The dovish posture failed to carry over buying interest into today's session as participants responded to mixed performances from global markets and a downturn in crude oil. The energy component was under pressure after the International Energy Agency's monthly report struck a bearish tone. The IEA cut its global demand growth forecast for 2016 to 1.3 million barrels per day (previous: 1.4 million barrels) while the group also trimmed its 2017 growth estimate to 1.2 million barrels (previous: 1.4 million barrels). The negative revisions cast doubt on the potential timetable for an oil market rebalancing.
Today's economic data at Wall Street was limited to the Treasury Budget for August. The Treasury Budget for August showed a deficit of $107.1 billion versus a deficit of $64.4 billion in August 2015. The Treasury Budget data is not seasonally adjusted, so the August deficit cannot be compared to the $112.8 billion deficit registered in July. Total receipts in August were $231.3 billion while total outlays were $338.4 billion. Receipts were $20.5 billion more than receipts in August 2015. Total outlays, meanwhile, were $63.2 billion more than the same period a year ago. The 12-month deficit widened to $529.9 billion from $487.2 billion in July.
Separately, a reading of U.S. household income showed that median incomes grew 5.2% during the year the biggest annual increase in median household incomes since the start of the Great Recession.
Fed Gov. Lael Brainard on Monday struck a dovish tone, saying the central bank needed to be prudent in considering future rate rises. Her comments hit just minutes before gold's settlement, keeping prices for the metal off the day's lows. Financial markets had braced for potential signals from Brainard for an imminent hike, especially after hawkish-leaning chatter from her colleagues in recent days.
On Tuesday, the ICE U.S. Dollar Index rose by 0.4%, while U.S. equities traded lower after a rally on Monday.
Oil prices settled sharply lower after the International Energy Agency warned demand growth is slowing at a faster pace than initially predicted. The warning comes just a day after the Organization of the Petroleum Exporting Countries said output from producers outside the cartel is stronger than expected. The agency downgraded its global oil demand predictions by about 100,000 barrels a day for this year to growth of 1.3 million barrels a day, and cut its forecast for 2017 by 200,000 barrels to growth of 1.2 million barrels a day.
Crude-oil futures slumped $1.39, or 3%, to settle at $44.90 a barrel on Tuesday following the IEA report, while Brent futures fell 2.5% to $47.10 a barrel.
Bullion prices ended lower at Comex on Tuesday, 13 September 2016.Gold futures failed to hold on to earlier gains on Tuesday as pressure from strength in the U.S. dollar prompted prices to extend their losing streak to a fifth session in a row. Some dovish Federal Reserve comments on Monday had helped to cool expectations for an interest-rate hike as soon as next week, but the greenback managed to post gains on Tuesday ahead of next week's Fed policy meeting.
On Tuesday, December gold fell $1.90, or 0.1%, to settle at $1,323.70 an ounce. December silver fell 2.5 cents, or 0.1%, to $18.975 an ouncealso its lowest settlement since the start of this month.
Treasuries ended sharply lower with the long end of the curve demonstrating relative weakness. The yield on the 2-yr note rose two basis points to 0.79% while the yield on the 10-yr note jumped six basis points to 1.72%.
Today's participation was above the recent average as more than one billion shares changed hands on the NYSE floor.
Tomorrow's economic data will include the 7:00 ET release of the weekly MBA Mortgage Index. Meanwhile, Import/Export Prices for August will each cross the wires at 8:30 ET.
Powered by Capital Market - Live News
Disclaimer: No Business Standard Journalist was involved in creation of this content
