Stocks gave back all the gains achieved earlier in the week, as a selloff in crude oil punished the energy sector and fueled a dour mood on Wall Street. 

The S&P 500 was down nearly 1.5% on Tuesday, the Dow Jones Industrial Average declined 1.4%, and the Nasdaq fell 1.1%. Losses have more than doubled since market open. The CBOE Volatility Index (VIX.X) , commonly known as the 'fear index,' has risen nearly 50% since Friday's selloff.

Crude oil moved lower on Tuesday after the International Energy Agency said global demand growth was slowing by more than previously thought and predicted the slowdown would continue in 2017. The agency expects global demand to increase by 1.3 million barrels a day this year, 100,000 barrels slower than previously forecast.

"Recent pillars of demand growth -- China and India -- are wobbling," the IEA said in its monthly report. "After more than a year with oil hovering around $50 a barrel, the [economic] stimulus from cheaper fuel is fading."

West Texas Intermediate crude fell 3% to $44.90 a barrel on Tuesday.

"The weakness in oil is translating into equity market weakness and U.S. dollar strength, further undermining oil market sentiment in turn," said Tim Evans, energy futures analyst at Citi. "It's a risk-off trade day."

Energy stocks were the worst performers on the markets Tuesday. Exxon Mobil (XOM - Get Report) , Shell (RDS.A - Get Report) , Total (TOT - Get Report) , BP (BP - Get Report) and Petrobras (PBR - Get Report) were all sharply lower, while the Energy Select Sector SPDR ETF (XLE - Get Report) slid 2.8%.

Benchmark indexes rocketed higher on Monday in a rebound from Friday's selloff after Fed Gov. Lael Brainard urged caution and "prudence" in the central bank's decision-making. The S&P 500 and Dow gained more than 1% to erase more than half of the losses suffered over Friday's session.

Goldman Sachs economists reduced their odds for a rate hike in September following the dovish comments from Brainard. Goldman now gives a hike at the Sept. 20-21 meeting a 25% probability, down from a previous forecast of 40%. It's the third time this month that Goldman has updated its odds for September.

"A common theme [in Monday's Fed comments] was the absence of a clear signal that the Federal Open Market Committee is likely to hike in September," economists wrote in a note. "The lack of a signal is meaningful because if action were likely, the committee would normally make an effort to nudge the market toward anticipating a hike."

Markets are pricing in an even lower probability for September. Chances of an interest rate hike this month fell to 15% on Monday, down from a 24% likelihood at the end of last week, according to CME Group fed funds futures. The majority of investors are banking on a rate hike in December. Chances of a move during the Fed's final meeting of the year sit at 48%.

Speculation over the outcome of next week's meeting will be rife in the coming days with little in the way of new information on which to trade. No Fed members are left to speak this week, few companies of note are set to report, save Oracle (ORCL - Get Report) on Thursday, and economic data such as producer and consumer prices and retail sales are crammed into a busy Thursday and Friday.

"The month of September is living up to its expectations as being a tough month to ride out, as seasonal factors weigh down the markets," Peter Cardillo, chief market economist at First Standard Financial, wrote in a note. "We think [a pullback] will be swift and short-lived... We don't look for a prolonged market readjustment, since the VIX is likely to continue to rise as the quarterly options expirations kick in this week. In summary, we look for a six to eight percent overall decline in the coming days."

September is historically the worst-performing month for stocks with seasonal factors such as light trading volumes and a general wariness over historical trading patterns. The Dow has fallen an average 1.1% in September since the benchmark index was created in 1896, compared to an average gain of 0.8% over the remaining 11 months.

Atlanta Fed Pres. Dennis Lockhart announced Tuesday that he will step down from his position, effective the end of February. Lockhart has held the position for nearly a decade. Atlanta Fed's board of directors, led by Chairman Thomas Fanning, will conduct the search for a replacement.

Lockhart skirted a discussion of the Fed's interest rate plans in a speech on Monday, pointing to the highly sensitive nature of markets. "Financial markets seem to be very sensitive to remarks of Fed speakers at the moment," Lockhart noted.

Apple (AAPL - Get Report) was the only Dow component in the green, after suppliers T-Mobile (TMUS - Get Report) and Sprint (S - Get Report) each reported strong pre-orders for the iPhone 7 and iPhone 7 Plus. Sprint said orders for the latest models were up more than 375% over the first three days compared to last year. Apple shares rose 2.6%.

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