U.S. stocks fall for second day as investors eye oil markets ahead of Fed meeting

U.S. stocks were mostly lower at the start of trade Tuesday, one day after an attack on major oil-processing facilities in Saudi Arabia sparked supply fears, driving crude oil futures to the sharpest single-session rally since the 2008 financial crisis.

Meanwhile, investors are turning their attention to central bank policy, with a Federal Reserve meeting set to get under way later Tuesday. U.S. policy makers expected to cut interest rates by a quarter of a percentage point at the conclusion of the meeting Wednesday.

How are major benchmarks faring?

The Dow Jones Industrial Average

DJIA, -0.14%

  declined 80 points, or 0.3%, at 27,002, the S&P 500 index

SPX, +0.00%

fell 3 points at 2,995, a decline of 0.1%, while the Nasdaq Composite index

COMP, +0.01%

  fell 1 point, or less than 0.1% to 8,152.

On Monday, the Dow fell 142.7 points, or 0.5%, to close at 27,076.82, ending an eight-day winning streak. The S&P 500 index  shed 9.43 points, or 0.3%, to finish at 2,997.96, while the Nasdaq Composite Index dropped 23.17 points, or 0.3%, to end at 8,153.54.

What’s driving the market?

Tensions in the Middle East remain high after the Saudi Arabian oil-processing hubs were attacked over the weekend, leading to the biggest single-day disruption in the crude oil market in its history and a record surge for oil futures.

U.S. officials have blamed Iran for the Saudi attacks that knocked out 5.7 million barrels of global production, representing about 5% of the world’s oil output. Saudi Arabia has enough oil in storage to make up the lost production for about 30 days, but it may take weeks or months for the facility to come back on line, Bloomberg reported

The events have increased tensions between Iran and the U.S., with Iran’s Ayatollah Ali Khamenei saying that he will not negotiate with the U.S., which has maintained sanctions against Iranian oil exports since Trump last year pulled out of a pact limiting Tehran’s nuclear ambitions even though the country was largely in compliance.

President Donald Trump may still meet with Iran’s President Hassan Rouhani in New York on the sidelines an annual United Nations General Assembly later this month, according to reports. Trump has been hesitant to directly hold Iran responsible for the Saudi attacks but has said that evidence from U.S. intelligence agencies, which have been shared with Riyadh, points to the Islamic Republic.

The Middle Eastern drama has temporarily overshadowed the Sino-American trade war, which had weighed on market sentiment and contributed to expectations that the Fed would reduce interest rates to tamp down the chance of an economic slowdown in the U.S.

A trade delegation from China is expected in Washington on Wednesday to set the agenda for an October meeting on resolving the trade dispute.

Meanwhile, Federal Reserve rate-setting committee is set to kick off its gathering later Tuesday. However, market expectations for a rate cut of about a quarter of a percentage point have pulled back, with federal-funds futures showing a 65.8% chance of a cut on Wednesday, compared with a 92.3% chance a week ago, according to CME Group data.

Market analyst Mark Newton, founder of Newton Advisors, said Monday’s slump for stocks shows that gains for equities may be losing some momentum ahead of the FOMC meeting.

“Yesterday brought about the ‘Shot across the bow’ with regards to stock and bond yield declines after nearly 3 weeks of uninterrupted progress,” Newton wrote in a Tuesday research note.

“Regardless if the S&P 500 can manage to bounce back into this week’s FOMC decision . . . the trend is losing momentum at a time when multiple trendlines are acting as resistance and seasonality for this time in September remains quite weak,” he added.

On the data front, U.S. industrial production rose 0.6% in August, the Federal Reserve said Tuesday, above the consensus expectation of a 0.4% increase, according to a MarketWatch poll of economists. Capacity utilization increased by 0.4 percentage point to 77.9%, above expectations of 77.6%.

At 10 a.m. Eastern Time, the National Association of Home Builders will release its Housing Market Index.

Which stocks are in focus?

WeWork parent The We Co.

WE, +0.00%

 was expected to launch its initial public offering as soon as next week, but the sale will be delayed until at least October, according to a report in the Wall Street Journal. The delay comes amid concerns about the companies valuation, which reached $47 billion in private markets last year, and following a pledge to make extensive changes to its governance structure.

Shares of Corning Inc.

GLW, -7.62%

 tumbled 7.8% after the glass and ceramics manufacturer reduced its outlook for the full-year 2019.

Shares of KLA Corp.

KLAC, +2.14%

 rose 1.4% Tuesday morning after closing at a record high on Monday, after the company raised its dividend 13% and authorized an additional $1 billion in share repurchases.

InterActive Corp.

IAC, +2.58%

 stock rose 1.3% Tuesday, after Citi Research initiated coverage of the firm, which has stakes in Match Group Inc.

MTCH, +3.15%

 , ANGI Homeservices Inc.

ANGI, -3.22%

 and other online services including Vimeo and Dotdash. Analyst Nicholas Jones rated the company as a “buy.”

How are other markets trading?

The yield on the 10-year U.S. Treasury note

TMUBMUSD10Y, -1.99%

 fell 1 basis point to 1.83% from 1.843% on Monday.

Read: Saudi oil attack shows bond traders are worrying more about growth than inflation

Gold prices

GCZ19, +0.11%

 pulled back 0.1% to about $1,511 an ounce after jumping 0.8% on Monday, while the U.S. dollar was flat after a 0.4% rise a day ago, as measure by the ICE U.S. Dollar Index

DXY, -0.26%,

a gauge of the buck against a basket of leading rivals.

West Texas Intermediate crude for October delivery

CLV19, -5.50%

the U.S. benchmark contract, was down 1.1% at $62.23 a barrel on the New York Mercantile Exchange after a 14.7% surge Monday, its biggest one-day percentage climb since September 2008, while November Brent crude

BRNX19, -5.33%

declined 1.3% to $66.79 a barrel, following its sharpest-ever daily percentage rise, 14.6%, according to Dow Jones Market data.

In Asia overnight Monday, Hong Kong’s Hang Seng Index

HSI, -1.23%

fell 1.2%. China’s CSI 300 Index

000300, -1.68%

 sank 1.7%, and Japan’s Nikkei 225 index, which didn’t trade on Monday due to a holiday, finished with a gain of less than 0.1%. In Europe, the Stoxx Europe 600

SXXP, -0.12%

 traded 0.3% lower.

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