US open: Stocks drop as oil prices fall on supply glut worries
US stocks were in the red on Tuesday as oil prices fell and as investors continued to digest dovish comments by Federal Reserve governor Lael Brainard.
At 1449 BST the Dow Jones Industrial Average dropped 0.97% to 18,146.57 points, the S&P 500 declined 1.08% to 2,135.29 points and the Nasdaq slid 0.90% to 5,164.13 points.
At the same time oil prices retreated after the International Energy Agency said the crude market will be oversupplied at least through the six months of 2017. West Texas Intermediate crude was down 1.6% to $45.52 per barrel and Brent was down 1.08% to $47.80 per barrel.
Stocks in the US ended higher on Monday on the back of a dovish speech by Federal Reserve governor Lael Brainard, who said at the Chicago Council on Global Affairs that although economic progress is being made, it would be wise for the Fed to keep monetary policy loose.
In addition, Minneapolis Fed President Neel Kashkari told CNBC that policy makers should take their time to when it comes to making a decision on interest rates.
The more dovish tone from Brainard and Kashkari followed hawkish comments last week from Boston Fed President Eric Rosengren, which had sparked concerns that the Fed would hike rates at its next policy meeting on 20-21 September.
“The Federal Reserve blackout period is now upon us, giving traders a week to speculate on the impact of what has been said and the few pieces of data we get between now and the decision next Wednesday,” said Craig Erlam, senior market analyst at Oanda.
“While a hawkish consensus does appear to be building among the committee, the absence of some key policymakers from this makes a hike at the meeting next week very unlikely.”
In other US economic news, the NFIB small-business index fell in August to 94.4 from 94.6 in July. Economists had expected a reading of 94.8.
Elsewhere, China data showed the nation’s fixed-asset investment was unchanged at 8.1% in the January to August period, better than the 7.9% expected.
Chinese industrial production grew 6.3% year-on-year in August, beating estimates for a 6.2% rise and following a 6% gain the previous month, the National Bureau of Statistics revealed.
Retail sales in the nation jumped an annualised 10.6% in August after a 10.2% increase in July. Analysts had forecast no change in growth.
In the UK, inflation rose 0.6% in the year to August, unchanged from July’s growth but below estimates for a 0.7% increase, the Office for National Statistics revealed.
On the corporate front, semiconductor maker Intersil Corp surged after Japanese chip maker Renesas Electronics announced that it will buy the company for $3.2bn.
Oil and gas firm Anadarko Petroleum slumped after saying late on Monday that its board of directors has agreed to buy the deepwater Gulf of Mexico assets of Freeport McMoRan Oil & Gas for $2bn.
Tiffany & Co. rallied after the jeweller named Mark Erceg as its chief financial officer.