U.S. Stocks Retreat as Oil Prices Slump
By Jessica Menton and Christopher Whittall
The S&P 500 fell Thursday, dragged down by shares of energy companies as U.S. crude oil entered a bear market.
Energy stocks in the index tumbled 2.2% as oil dropped 1.6% to $60.67 a barrel. That marks a decline of more than 20% from Oct. 3's high of $76.41 a barrel and ends oil's longest bull market since 2008. The slump has been fueled, in part, by the U.S. government's decision to soften oil sanctions on Iran.
"If oil breaks below $60 a barrel, that would be psychologically significant for the market where investors may lose confidence in crude prices," said Stacey Morris, director of research at Alerian.
The S&P 500 declined 7.06 points, or 0.3%, to 2806.83, while the Dow Jones Industrial Average rose 10.92 points, or less than 0.1%, to 26191.22. The technology-heavy Nasdaq Composite shed 39.87 points, 0.5%, to 7530.88.
After a turbulent period for stocks, the S&P 500 had climbed in six of the previous seven sessions entering Thursday and notched a 2.1% gain on Wednesday -- its largest postelection increase since 1982.
Concerns over slumping oil prices, rising interest rates, the longevity of the U.S. expansion and the heady valuations of large technology companies led many investors to pull back in October. The S&P 500 fell nearly 7% that month, its steepest decline in more than seven years, despite most U.S. companies reporting robust earnings growth.
Interest rates were back in focus Thursday as the Federal Reserve held short-term rates steady. The central bank offered a mostly upbeat assessment of the economy's performance, suggesting another rate increase is likely at its next meeting in December. Economists have debated whether rising inflation will force the central bank to raise rates faster than investors are anticipating.
"Inflation hasn't gotten too out of control, but there is a question of whether it makes sense for the Fed to take a pause, given the skittishness we've seen in the market in the past month," said Lindsey Bell, investment strategist at CFRA Research.
The yield on the 10-year Treasury note rose to 3.232% Thursday from 3.215% Wednesday, its highest level since May 2011. Yields rise as bond prices fall. The WSJ Dollar Index, which measures the greenback against a basket of 16 other currencies, added 0.5%.
Getting through the midterm elections removed one element of uncertainty hanging over the market. The result met most investors' expectations for the Democrats to gain control of the House of Representatives and the Republicans to retain the Senate.
Analysts say the likely gridlock in Washington will reduce uncertainty for companies over potential changes to economic policy and regulations. It should also decrease the likelihood of the Trump administration passing other measures that could fuel growth -- but inflate the budget deficit -- such as further tax cuts.
Investors are "just happy to get it behind us. Markets tend to like it when things go as expected," said Matt Brill, a senior portfolio manager for Invesco Fixed Income.
It also eliminates "the tail risk of greater budget deficits going forward," he added.
Disappointing corporate news drove some of Thursday's modest declines.
Shares in Wynn Resorts lost $14.97, or 13%, to $99.02 after the hotel and casino operator reported profit that fell short of analyst expectations and cast doubt on its Macau business in the fourth quarter.
Qualcomm slumped $5.16, or 8.2%, to $58.05 after the company posted a loss in its latest quarter. Shares of Monster Beverage fell $1.77, or 3.2%, to $54.14 after partner Coca-Cola said it would launch its own energy drinks.
Elsewhere, the Stoxx Europe 600 rose 0.2%. Most markets in the Asia-Pacific region rose, catching up with the sharp jump on Wall Street in the previous session.
In Asia, Japan's Nikkei Stock Average added 1.8% after registering a small decline Wednesday. Hong Kong's Hang Seng Index climbed 0.3%, while Korea's Kospi index rose 0.7%. China's Shanghai Composite Index bucked the trend, falling 0.2%, in its fourth consecutive session of declines.
Write to Jessica Menton at Jessica.Menton@wsj.com and Christopher Whittall at firstname.lastname@example.org