A tumble in oil prices Wednesday prompted investors to sell shares of energy companies, weighing on the broader stock market.
Stocks had briefly pared losses to trade near the flatline after the minutes from the Federal Reserve’s July meeting showed no clear sign that officials are ready to raise interest rates next month.
Stocks have rallied since the financial crisis, driven in part by ultralow interest rates. The minutes from the Fed’s July policy meeting, which showed officials have still not settled on whether to raise rates in September, prompted a knee-jerk move in the market. At the same time, investors say, if the Fed decides to hold off on raising rates due to concerns about the global growth outlook, that could dim the outlook for corporate profits and future stock gains.
The Dow Jones Industrial Average fell 162.61 points, or 0.9%, to 17348.73, capping a turbulent session. The blue-chip index had dropped as much as 229 points and briefly recouped all losses in the wake of the Fed minutes.
“The Fed may well indeed back off on September,” said Brad McMillan, chief investment officer of Commonwealth Financial Network. Some Fed officials expressed qualms about the inflation outlook, which could give them a reason to hold off on a rate increase next month despite labor market improvement, he added.
“The market is wrestling with where we’re going from here. Any piece of information can have almost a disproportionate response,” Mr. McMillan added, referring to the swings in stocks after the Fed minutes.
Utilities, often referred to as bond proxies for their high dividends, turned higher in the wake of the minutes. Treasury prices rose, pushing the 10-year yield down to 2.129% from 2.196% on Tuesday.
Declines in energy stocks outpaced losses in other sectors, with Chevron Corp. and Exxon Mobil Corp. leading the Dow industrials lower. Materials stocks, which are closely tied to commodity prices, also dropped.
Oil prices fell to a fresh six-year low after data showed a surprise increase in U.S. stockpiles, adding to the glut of crude around the globe. Worries about future demand as the Chinese economy loses steam have also weighed on commodity prices. Crude-oil futures dropped 4.3% to $ 40.80 a barrel.
The downbeat tone for stocks around the globe started in China, where shares spent most of the session in negative territory before a late-day turnaround. The Shanghai Composite Index ended up 1.2% after falling as much as 5%. The rebound came after a number of companies disclosed that state-backed firms were among their top shareholders, bolstering investors’ confidence that the government was stepping in to support the market.
The sharp moves sparked declines in other Asian markets, including in Japan and Hong Kong. The losses continued in Europe, with Germany’s DAX down 2.1% and France’s CAC-40 losing 1.75%.
The turmoil in China, which included a rout in stocks earlier this summer, is raising worries of a slowdown in the world’s second-largest economy. Those concerns were bolstered last week when China unexpectedly devalued its currency.
“Investors are pretty nervous about what’s going on in China,” said Gina Martin Adams, equity strategist at Wells Fargo Securities. “The market interpretation of policy makers’ moves [in China] is that they’re trying desperately to stem the negative tide there,” she added.
Back in the U.S., the end of earnings season continued to attract attention.
Lowe’s LOW 1.85 % Cos. on Wednesday reported weaker-than-expected profit growth in its second quarter, though the retailer logged an increase in a key sales metric amid sales of big-ticket items. Shares rose 1.85%.
Target Corp. lifted its profit outlook for the year after posting stronger-than-expected earnings in its second quarter. Shares rose 0.7%.
In other markets, gold futures gained 1% to $ 1128.10 an ounce.
Write to Saumya Vaishampayan at firstname.lastname@example.org