U.S. equity markets struggled for direction, swinging between sharp gains and losses throughout the session, as global growth fears continued to plague sentiment.
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The Dow Jones Industrial Average was down 12 points, or 0.08% to 16014. The S&P 500 slipped 1point, or 0.06% to 1852, while the Nasdaq Composite slid 15 points, or 0.35% to 4268.
Energy, telecommunications, and financials were among the biggest laggards of 10 S&P 500 sectors, while materials saw the biggest gain.
Wall Street bounced between gains and losses on Tuesday, but failed to hold onto gains by the closing bell. Global-growth concerns continued to weigh on sentiment as downside momentum pulled down stock markets across the globe as oil prices dropped dramatically.
West Texas Intermediate crude plunged 5.89% to settle at $27.94 a barrel, while Brent, the international benchmark, plunged 7.79% to $30.32 a barrel.
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Jitters about global oversupply continued to ripple through the energy market, dragging down the price of oil ahead of key U.S. supply data. Figures from the American Petroleum Institute were due out at 4:00 p.m. ET, while the latest weekly inventory data from the Energy Information Administration was set for release on Wednesday morning.
Investors parsed comments from the International Energy Agency, which, overnight said that a global oil supply glut would likely be even greater than expected. Prices have seen weeks of drastic declines due to the oversaturated global market and made worse worries that high-producing nations would not meet to discuss the possibility of curbing production to help re-balance the market.
Though China’s markets were closed all week to observe the New Year, Japan’s Nikkei saw a plunge of more than 5% as financials and defensive names continued to underperform. The index saw its worst closing level in three years and its biggest percentage decline since 2013.
Meanwhile, pressure remained on global banks after Deutsche Bank said Monday it had “sufficient” reserves to make payments on certain securities.
In an attempt to quell market fears about whether it could maintain bond payments, the company’s co-CEO, John Cryan, said the bank remains “rock solid” on Tuesday. Goldman Sachs (GS) CEO added his thoughts to the equation at a Credit Suisse financial services conference, saying the financial health of the biggest banks is stable after efforts taken to bolster balance sheets after the Great Recession.
On Tuesday, the Stoxx Europe 600 bank sub index on Tuesday dropped 3.45%, extending weekly losses to 9.8%. On a year-on-year basis, the index has shed more than 27%. Meanwhile, the S&P 500 Banks industry group shed 3.21% on Monday, and shed 0.89% on Tuesday. Goldman Sachs (GS) and JPMorgan Chase (JPM) weighed on the Dow through the trading day.
In the U.S., all eyes were focused on Federal Reserve Chief Janet Yellen, who was set to appear in front of Congress Wednesday and Thursday to give her semi-annual monetary policy report. With renewed turmoil spreading through global markets, Luke Bartholomew, Aberdeen Asset Management investment manager, said the central bank chief will likely hint that the path of future rate hikes in the U.S. will be easier than previously guided.
“The volatility we saw in January has meant financial conditions have tightened significantly. It probably doesn’t reflect a weaker U.S. economy, but markets have a habit of creating self-fulfilling prophecies. Large selloffs can hurt the economy which itself creates the conditions, which then justify the selloff,” he explained.
Expectations for a rate hike have been moved out well into 2016 and 2017 as Wall Street bets the Fed is unlikely to move as global growth worries continue to rock sentiment.
As investors remained unsure about dipping back into the equity markets, safe-haven trades found stabilization.
In recent action, the yield on the benchmark 10-year U.S. Treasury bond gained 0.009 percentage point to 1.726% Yields move in the opposite direction of prices.
Meanwhile, gold gained 0.07% to $1,198 a troy ounce. Silver and copper also declined.
Larry Shover, chief investment officer at Solutions Fund Group, said gold has so far enjoyed a positive start to the year, hitting a 12-week high as investors flocked to buy up the commodity. However, he warned it was also susceptible to sudden shifts.
“Many things have gone right for gold this year, but the rally appears most easily explained by changes in key U.S. financial variables rather than re-rating of gold relative to them,” he explained. “As such, while further gains are possible, gold remains vulnerable to any shift in macro sentiment.”