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 /zigman2/quotes/210598065/realtime DJIA -0.44% closed 258.05 points, or 1.4%, lower at 18,066.89, and was down nearly 300 points at its lowest. The steep drop marked the third straight triple-digit move for the blue-chip gauge, following a period of unnatural calm on Wall Street. Only Apple Inc . /zigman2/quotes/202934861/composite AAPL -1.03% shares ended in positive territory among Dow components, rising 2.6%. Shares of Chevron Corp. , off 2.8%, and Exxon Mobil Corp. /zigman2/quotes/204455864/composite XOM -0.80% , down 2.4%, led decliners.
The S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.38% gave up 32.02 points, or 1.5%, at 2,127.02. All 10 sectors of the S&P 500 ended lower, led by a 2.9% drop in energy. All of the components of the energy sector traded in the red, with Chesapeake Energy Corp . /zigman2/quotes/201364537/composite CHK -0.15% closing down 8.3% to top its worst performers.
Meanwhile, the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.67% fell 56.63 points, or 1.1%, at 5,155.25.
Kent Engelke, chief economic strategist at Capitol Securities Management, said a combination of a higher dollar and lower oil were the biggest drags on the market. He also said investors are still nervous about the possibility of a rate increase sometime in 2016, if not as early as September.
Stocks have benefited during a protracted period of easy-money policies.
“A higher dollar and concerns about higher interest rates all dictate lower stocks,” Engelke said. The ICE U.S. dollar index /zigman2/quotes/210598269/delayed DXY -0.03% , a gauge of the greenback against six rival currencies, was up 0.5%.
Notable in Tuesday’s moves was a 7.2-basis-point rise in the benchmark 10-year Treasury note /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.67% to 1.73% — its highest level since June 23, the day of the U.K.’s vote to exit from the European Union. Bond prices and yields move inversely. The sell-off in bonds, which pushed bond yields higher, accelerated after hedge-fund manager Paul Singer, head of Elliott Management, said investors should sell long-term bonds in anticipation of a rise in inflation, speaking Tuesday at the Delivering Alpha conference in New York, hosted by CNBC and Institutional Investor.
On Monday, U.S. stocks closed near intraday highs after comments from Federal Reserve Gov. Lael Brainard momentarily calmed market fears that the central bank will raise interest rates soon. The S&P 500 index rallied 1.5%, while the Dow industrials jumped 1.3%.
Frank Cappelleri, executive director at Instinet LLC, said politics is contributing to market moves, as the presidential race between Democratic nominee Hillary Clinton and Republican candidate Donald Trump heats up. “The [presidential] election and anything that happens to be political continues to weigh on investors’ minds,” he said.
“I think that September has a lot of enhanced moves in both directions and I think we’ll have a lot more,” Cappelleri said.
On Monday, Brainard said the Fed should be cautious in tightening policy to avoid getting trapped in a low-growth, low-inflation environment.
Hawkish comments from Boston Fed President Eric Rosengren last week spurred expectations for a move by Fed policy makers at their Sept. 20-21 meeting. However, after Brainard’s remarks, the probability of a rate increase next week fell.