US stocks fall as oil weighs on energy shares; dollar gains

Bloomberg

US stocks gave up earlier gains and turned lower as oil tumbled following a government report showed expanding inventories and production in what will soon be the world’s largest source of crude. Treasuries climbed with the dollar.
“We’re kind of at an inflection point with oil,” said Tom Anderson, chief investment officer of Boston Private Wealth. “It’s hard to be overly bullish on the price of oil because of the ability for supply to come on board so rapidly. So I think you’re going to see the bias of oil keep pulling things down.”
The S&P 500 Index and Dow Jones Industrial Average were lower one day after falling more than 1 percent based on a generally upbeat assessment of the US economy from Federal Reserve Chairman Jerome Powell, which left investors wondering if the central bank planned more interest rate hikes than expected in 2018.
US and European bond yields have soared in recent months amid speculation that the Fed’s monetary policy will be tightened at a faster pace.
But in the equity markets that possibility is increasingly testing nerves, as traders try to divine how many increases are coming.
“What the markets are telling you today and year-to-date is that interest rate hikes are expected and that’s getting priced in,” Medha Samant, Fidelity International investment director, said on Bloomberg TV.
“The question is, despite all the upbeat data that we see coming out of the US, what is going to be the pace of these rate hikes and how quickly is it going to happen.”
Miners led a decline in the Stoxx Europe 600 Index after China posted lower-than-expected manufacturing output. The UK pound extended a decline and the nation’s bonds rose after the EU published a draft Brexit treaty, with Prime Minister Theresa May squaring off for a fight. The euro slipped while most bond yields in the region ticked lower.
Elsewhere, crude oil was little changed as the International Energy Agency warned about seemingly unstoppable US shale production.
Fed Chairman Powell testifies before the Senate Banking Committee Thursday. Other Fed speakers this week are Neel Kashkari and Bill Dudley. In the euro region, investors will be watching manufacturing and jobs numbers on Thursday. UK Prime Minister Theresa May delivers a speech on Friday on Britain’s relationship with the European Union. Japan capital spending is out on Thursday.
The S&P 500 Index was down 0.2 percent in New York. The Stoxx Europe 600 Index dropped 0.7 percent. Germany’s DAX Index declined 0.4 percent. The U.K.’s FTSE 100 Index slid 0.7 percent. The MSCI Asia Pacific Index fell 0.9 percent.
The Bloomberg Dollar Spot Index gained 0.1 percent. The euro declined 0.1 percent to $1.2201, the weakest in five weeks. The British pound dipped 0.8 percent to $1.3802, the lowest in almost seven weeks. The Japanese yen rose 0.6 percent to 106.66 per dollar.
The yield on 10-year Treasuries dipped one basis point to 2.88 percent.