U.S. equities and stock exchange traded funds dipped Tuesday as crude oil prices declined for the sixth consecutive day. The markets were also on shaky ground ahead of the highly anticipated Federal Reserve announcement tomorrow.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), were 0.4% lower Tuesday.
The energy sector was among the worst performers, with the Energy Select Sector SPDR (NYSEArca: XLE), the largest equity-based energy exchange traded fund, down 1.4% Tuesday as West Texas Intermediate crude oil futures decreased 1.9% to $47.5 per barrel.
Oil prices fell to a three-month low after the Organization of Petroleum Exporting Countries announced an increase in global crude oil stockpiles and a surprise surge in production from Saudi Arabia, the organization’s largest member, report Yashaswini Swamynathan and Tanya Agrawal for Reuters.
Moreover, some are worried that rising production in the U.S. could offset efforts to diminish the global supply glut that depressed oil prices, the Wall Street Journal reports. The falling crude prices have already affected other areas of the market.
“It does affect business fixed investment and economic growth if we see a continued downturn,” Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, told the WSJ.
Meanwhile, markets remain subdued ahead of the Federal Reserve announcement Wednesday, with options traders anticipating a 90% chance of a quarter point rate hike as inflation rises and labor markets strengthen.
“It’s a foregone conclusion that the Fed will raise rates, but there is an expectation that the central bank may raise their expectation from three hikes this year to four,” Michael Scanlon, portfolio manager at Manulife Asset Management, told Reuters.
Additionally, the election cycle across the Eurozone has also kept global markets on edge, with tomorrow’s election in the Netherlands revealing the state of populism in Europe as the race gains speed in France and Germany.
“Chances are we’re going to hear some pushback from Europe,” Jane Foley, currency strategist at Rabobank, told the WSJ.
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