US close: Falling oil prices, rising dollar and mixed Fedspeak dents stocks

Falling oil prices weighed on Wall Street to drag stocks indices back from their record highs as a septic stock environment was created amid a higher dollar and mixed remarks from top US central bank policymakers.

By the closing bell, the Dow Jones Industrials had lost 61.85 or 0.29% to finish at 21,467.14, alongside a 0.67% dip for the S&P 500 to 2,437.03 and a decline of 0.82% in the Nasdaq Composite to 6,188.03.

Oil equipment and exploration stocks were at the bottom of the pile as traders continued pushing crude oil futures lower.

Front month West Texas Intermediate was down by 2.2% at $43.23 a barrel on NYMEX amid bearish comments from some analysts and continued noise around steadily increasing oil supplies from Libya.

"The old fear of falling oil prices has gripped investors, and inflation in the US is slipping already, and if oil keeps tumbling, it could be a problem for the economy," said market analyst David Madden at CMC Markets.

"A certain amount of inflation is needed in an economy, and if it starts to decline by a lot, it sends out the wrong message about the economic health of a country. Last week, the Federal Reserve lowered their forecast for CPI and raised their growth outlook, if the oil slump persists, they may have to lower both in the coming months."

Jasper Lawler, senior market analyst at London Capital Group, added: "The assumption that extended Opec supply cuts would underpin the oil price is unravelling by the day. We would expect US crude to test $40 per barrel before any hopes of a sustainable recovery in oil prices."

Lawler added that Russian oil minister Novak's rubbishing of an emergency Opec/non-Opec meeting did not help the pricing, either: "Brent crude is down $10 per barrel in less than a month so if they (Opec) really aren't planning an emergency meeting, perhaps they should."

The dollar rose against the pound, hitting $1.261 for the first time since the UK's snap election was called before rebounding slightly to $1.2626 not long after Wall Street's session ended.

EURUSD slid to four-week lows of $1.1135 as the greenback gained across the board following some fairly hawkish Fed speak from Eric Rosengren on Tuesday and William Dudley overnight, said analyst Neil Wilson at ETX Capital.

New York Fed chief Dudley said halting the rate-hiking cycle now would imperil the economy, while Boston Fed boss Eric Rosengren said the era of low interest rates posed financial stability risks.

On Tuesday afternoon, Chicago Fed chief Charles Evans reiterated his cautious stance regarding the likelihood that inflation would return to the central bank's target.

He criticised the fact that core inflation had run below the Fed's 2.0% target since 2009. "This is eight full years below target. This is a serious policy outcome miss," he said.

Dudley and Evans are voting members of the Federal Open Market Committee but Rosengren is not.

A lone nugget of macroeconomic data to be released showed America's current account deficit increased by 2.5% during the first quarter of 2017 to reach $116.8bn (consensus: -$121.2bn).

Among stocks, Boeing was in focus after the jet manufacturer raised its forecast for new airplane demand over the next 20 years by 3.6% to $6.1trn or 41,030 aircraft in its latest current market outlook, published on the sidelines of the Paris Air Show.

Frontier Communications tumbled amid speculation that the telecom company could reduce its dividend again, with an article in the Wall Street Journal noting that Frontier is still working hard to restructure its debt in a way to minimise overall interest expense.

Ford was also in the news after announcing its intention to invest $900m in a Kentucky plant.

Dow Jones - Risers

Merck & Co. Inc. (MRK) $64.53 1.33%
Pfizer Inc. (PFE) $33.56 1.02%
American Express Co. (AXP) $82.51 0.77%
McDonald's Corp. (MCD) $154.07 0.61%
Coca-Cola Co. (KO) $45.61 0.51%
Travelers Company Inc. (TRV) $128.75 0.37%
Unitedhealth Group Inc. (UNH) $183.21 0.14%
Johnson & Johnson (JNJ) $134.22 0.11%
International Business Machines Corp. (IBM) $154.95 0.07%
Wal-Mart Stores Inc. (WMT) $75.54 0.05%