U.S. stocks trade lower amid Fed remarks as oil enters bear market

© Reuters. Wall Street register losses; oil slumps nearly 3%

Investing.com – Wall Street traded lower on Tuesday as investors looked past promises for tax reforms this year and digested comments from Federal Reserve (Fed) policymakers, all while oil slumped, officially entering a bear market.

At 11:39AM ET (15:39GMT), the Dow Jones dropped 17 points, or 0.08%, the S&P 500 lost 10 points, or 0.39%, while the Nasdaq Composite traded down 29 points, or 0.47%.

With no major economic reports scheduled for Tuesday, market players continued to focus on remarks from Fed officials.

Hawkish remarks made by influential New York Fed chief William Dudley, jump-started the upward trend in the dollar on Monday, as he reinforced expectations for the Fed to keep raising interest rates.

However, Chicago Fed president Charles Evans did deliver a more dovish outlook after the market close on Monday, suggesting that it may be worthwhile for the U.S. central bank to wait until year-end to decide whether to raise rates again.

On Tuesday, Fed vice chair Stanley Fischer did not address the outlook for U.S. monetary policy or the economy when he spoke in Amsterdam earlier in the day.

Boston Fed president Eric Rosengren also did not specifically discuss future plans for the removal of accommodation or the economic outlook, but did warn Tuesday that “monetary policy is less capable of offsetting negative shocks when rates are already low.”

The Dallas Fed Robert Kaplan will speak in San Francisco at the Commonwealth Club of California later at 3:00PM ET (19:00GMT).

Market players remained skeptical that the Fed would move again this year. According to Investing.com's Fed Rate Monitor Tool, Fed fund futures priced in the odds of a rate hike in September at only 18% while an increase by December remained below the 50% threshold at around 41%.

Perhaps adding to bullish sentiment in the dollar, both U.S. Treasury Secretary Steven Mnuchin and House Speaker Paul Ryan, prominent actors in the Republican tax reform debate, vowed that President Donald Trump would get tax reform done in 2017.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last up 0.26% at 97.48 by 11:40AM ET (15:40GMT).

Among the major currency pairs, weakness in sterling was particularly notable on Tuesday. Cable was off 0.9%, under pressure as Bank of England governor Mark Carney said earlier that it was not the appropriate time for the British monetary authority to raise interest rates.

Meanwhile, oil prices sank nearly 3% on Tuesday, as concerns over a glut in the market continued to batter sentiment.

News that OPEC members exempt from the supply cut agreement were increasing production along with U.S. shale producers only served to heighten bearish sentiment.

According to Reuters’ reports, Libya’s oil production had risen more than 50,000 barrels per day (bpd) to 885,000, while Nigerian exports were set to rise by 62,000 bpd in August.

On the back of the news, oil tumbled with U.S. crude officially entering a bear market Tuesday, down nearly 22% since a $55.24 per barrel high touched on January 3.

U.S. crude futures tumbled 2.63% to $43.27 by 11:41AM ET (15:41GMT), while Brent oil sank 2.37% to $45.80.

In earnings news, shares of Lennar (NYSE:LEN) gained around 1.5% after the second-largest U.S. homebuilder reported better-than-expected quarterly profit.

In M&A activity, U.S. pharmaceutical research services provider PAREXEL International (NASDAQ:PRXL) said on Tuesday it would be taken private by Pamplona Capital Management for $88.10 per share, in a deal valued at about $4.5 billion.