U.S. stock indexes were on track to drift lower Tuesday morning, a day after an attack on major oil-processing facilities in Saudi Arabia sparked sparked fears over oil supplies, driving domestic crude futures to the sharpest single-session rally since the 2008 financial crisis.
Investors are keeping one eye on developments in the Middle East as central bankers in China and the U.S. retake the spotlight. A Federal Reserve gathering is set to get under way later Tuesday, with U.S. policy makers expected to cut rates by a quarter of a percentage point at the conclusion of the meeting Wednesday.
How are major benchmarks faring?
Futures for the Dow Jones Industrial Average
were off 47 points, or 0.2%, at 27,032, those for the S&P 500
were down 4 points at 2,997.50, a decline of 0.1%, while Nasdaq-100 futures
gave up 13.75 points, or 0.2%, to reach 7,865.75.
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 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. Bloomberg News reported that it may take weeks or months for the facility to come back on line.
The events have increased testiness 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 Tehran since pulling out of a global nuclear pact citing noncompliance months ago.
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 rates to tamp down the chance of an economic slowdown in the U.S.
The People’s Bank of China, meanwhile, has kept its one-year bank lending facility unchanged at 3.3%, but the central bank is expected to step up stimulus on Friday by guiding benchmark rates for new loans lower, Reuters reports.
In terms of U.S. monetary policy, the rate-setting Federal Open Market 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 technical 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 S&P 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.
How are other markets trading?
The yield on the 10-year U.S. Treasury note
fell 3 basis points to 1.81% from 1.843% on Monday.
Read: Saudi oil attack shows bond traders are worrying more about growth than inflation
pulled back 0.3% to $1,506.60 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
a gauge of the buck against a basket of leading rivals.
West Texas Intermediate crude for October delivery
the U.S. benchmark contract, was down 1.7% at $61.81 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
declined 1.5% to $67.98 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
fell 1.2%. China’s CSI 300 Index
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
traded 0.3% lower.