Sharp Selloff in Crude Pressures Wall Street Ahead of Fed Meeting
Investors kept one eye on plummeting crude oil prices on Monday and the other on the clock ahead of the kickoff to the Federal Reserve's July meeting tomorrow.
The former pushed stocks into the red for much of the day, snapping record-breaking streaks enjoyed last week. The S&P 500 fell 0.42%, the Dow Jones Industrial Average slid 0.30%, and the Nasdaq was down 0.05%.
Crude oil settled at a three-month low on Monday on an expected decline in U.S. refinery activity. Barclays said global oil demand in the current quarter was growing at less than one-third the rate of a year earlier.
Morgan Stanley noted that headwinds such as U.S. oversupply and falling demand were growing in the second half of the year. Analysts cut their global refinery demand forecast for crude to 625,000 barrels a day, down from 800,000.
West Texas Intermediate crude oil fell 2.4% to $43.13 a barrel on Monday.
"Upcoming scheduled refinery maintenance work really shouldn't come as a surprise and we see this as more of a background factor that may be reinforcing the evolving bearish market sentiment rather than a key shift in the underlying supply/demand balance," said Tim Evans, energy futures specialist at Citi.
The energy sector was the worst performer on markets Monday. Major oilers Chevron (CVX) - Get Report , Exxon Mobil (XOM) - Get Report , BP (BP) - Get Report and Royal Dutch Shell (RDS.A) were each lower, while the Energy Select Sector SPDR ETF (XLE) - Get Report fell 1.93%.
Members of the Federal Open Market Committee will convene on Tuesday for a two-day meeting, followed by an announcement on Wednesday afternoon. Federal Reserve Chair Janet Yellen won't hold a press conference following the meeting.
Investors are fairly confident the Fed will not make a move in July, though the Fed statement will be analyzed with a fine-tooth comb for hints as to when the central bank might adjust its monetary policy. A rate hike in July currently has a 2.4% probability, according to CME Group Fed funds futures. A December rate hike is the most likely with a 40% chance.
"Despite favorable domestic data releases and the resolution of the U.K.-Leave vote, we do not expect a rate hike at the July meeting," UBS analysts wrote in a note. "The FOMC will most likely acknowledge the data updates as encouraging signs for the economy and note that they will continue to monitor global financial developments."
Verizon (VZ) - Get Report agreed to acquire Yahoo!'s (YHOO) core Internet business for $4.8 billion after a months-long bidding process with multiple parties. Other potential candidates had included AT&T and private-equity firm TPG. Verizon's acquisition adds Yahoo!'s media companies including Yahoo Finance and Tumblr to Verizon's ad and media business, which includes last year's purchase of AOL. Yahoo! shares slipped 2.2% while Verizon shares fell slightly.
In earnings news, Sprint (S) - Get Report surged to new highs on growth in subscribers in its recent quarter. The telecom reported its lowest ever postpaid phone churn and added postpaid subs for its fourth straight quarter.
Kimberly-Clark (KMB) - Get Report fell 2% after topping second-quarter expectations but guiding for a softer-than-expected full year. The home goods company earned an adjusted $1.53 a share, 6 cents above estimates, while revenue of $4.59 billion exceeded estimates of $5.57 billion. Kimberly-Clark anticipates adjusted full-year earnings between $5.95 and $6.15 a share. Consensus was for $6.08.
A Fort Myers, Fla., shooting at a club hosting an event for teenagers has left two people dead and at least 14 more injured early Monday. Two suspects have been detained for questioning. Police confirmed the nightclub shooting was "not an act of terror."