Wall Street stocks retreat, oil tumbles on oversupply concerns

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NEW YORK: Wall Street stocks retreated on Wednesday led by health care and materials stocks, while oil prices tumbled about 3.0 percent on worries about oversupply.

Healthcare shares shares, fell 1.6 percent, their biggest drop since June 24.

Mylan slumped 5.4-percent to $43.15 after US presidential candidate Hillary Clinton joined a Senate committee in asking why the cost of its allergy treatment EpiPen had soared.

Shares in the materials sector closed 1.2 percent lower with miners such as Newmont Mining and Freeport-McMoRan the worst performers on the S&P 500 index, losing more than 7.0 percent, as gold and copper prices slumped.

Gold fell to a one-month low as the US dollar firmed and markets looked ahead to a speech by Federal Reserve Chair Janet Yellen on Friday that will be closely watched for further clues on US interest rate policy.

The fall in mining stocks also hit Canadian stocks with the Toronto Stock Exchange’s S&P/TSX composite index ending down 0.94 percent.

Oil prices tumbled, with US crude oil futures settling $1.33, or 2.77 percent, lower at $46.77 per barrel, after an unexpected large build up in US crude oil stockpiles renewed worries about oversupply. Brent crude prices were 1.90 percent, or 95 cents, lower at $49.01.

WORLD WAITS FOR YELLEN ON FRIDAY

In the last week of the northern hemisphere summer, world markets are looking ahead to see if Federal Reserve chair Yellen will raise the chances of another interest rate rise this year.

After its first rate hike in a decade last December, the Fed forecast four more rate rises this year, but weak global economic growth and market volatility have delayed any further monetary policy tightening.

In recent weeks though policymakers have again suggested the US economy is strong enough to warrant another hike by year end.

Futures markets assign a roughly one-in-five chance a rate rise will occur in September, and 50-50 odds by the end of the year.

“The market over the past several weeks has been in a holding pattern, really not doing much of anything and the reason for that is everyone is waiting to hear what Yellen is going to say,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

On Wall Street, the Dow Jones industrial average fell 65.82 points, or 0.35 percent, to 18,481.48, the S&P 500 lost 11.46 points, or 0.52 percent, to 2,175.44 and the Nasdaq Composite dropped 42.38 points, or 0.81 percent, to 5,217.70.

In Europe on Wednesday, stocks scored consecutive daily gains for the first time in three weeks, drawing support from a weak euro.

The FTSEuroFirst index of the leading 300 European shares closed up 0.3 percent, having earlier fallen as much as 0.4 percent, and Germany’s DAX staged a similar rebound to trade up 0.5 percent before paring some gains.

Investors’ nerves may have been soothed by signs that the anticipated economic slowdown in Britain from the shock vote in June to leave the European Union had not materialised.

“Brexit? What Brexit?” asked Holger Schmieding, chief economist at Berenberg Bank.

“In the rest of the EU, the repercussions of the Brexit vote have been rather mild.”

Sterling rose to a three-week high as speculators further cut bets against the currency after data indicated the economy was holding up after the Brexit vote.

The euro, which had fallen to a fresh one-week low against the US dollar, was last down 0.35 percent to $1.1264.

US Treasury yields inched upwards, but the mood was steady in anticipation of Yellen’s speech. Benchmark 10-year notes fell 2/32 in price to yield 1.56 percent, up from 1.55 percent on Tuesday.

The long-dated yield curve had flattened to the lowest in one-and-a-half years on Tuesday. A flattening curve is often seen as a harbinger of low growth, inflation and rates.

 

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