Drop in oil sends Wall Street sliding

Drop in oil sends Wall Street sliding
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(Sept 14): U.S. stocks fell sharply on Tuesday, with energy shares slammed by lower oil prices and financials dropping on diminished prospects of a near-term rate hike.

The selloff was broad, with all 10 major S&P 500 sectors in the red and every Dow Jones industrial average component except Apple declining.

The energy index's 2.86-percent slide led declines as oil prices tumbled as much as 3 percent after both the IEA and OPEC said the global crude glut would persist.

Three U.S. Federal Reserve officials on Monday took a dovish stance on interest rates, in contrast to more aggressive comments from other officials in the past two weeks.

"There is a heightened level of uncertainty regarding hikes, and investors aren't confident about any comments coming from Fed officials," said Andre Bakhos, managing director at Janlyn Capital, adding that the uncertainty would continue until the Fed's meeting on Sept. 20-21.

The S&P financial index fell 1.82 percent.

Futures traders cut the chances of a rate hike at the Fed's meeting on Sept. 20-21 to just 15 percent, from 21 percent, according to the CME Group's FedWatch tool. Goldman Sachs cut its view to 25 percent from 40 percent.

The Dow Jones industrial average fell 1.41 percent to end at 18,066.75 points and the S&P 500 lost 1.48 percent to 2,127.02.

The Nasdaq Composite dropped 1.09 percent to 5,155.26.

The CBOE Volatility index, known as Wall Street's "fear gauge," jumped 17 percent to 17.85.

The S&P 500 is trading at nearly 17 times expected earnings, well above its 10-year average of 14, according to Thomson Reuters Datastream.

"Stocks are priced for perfection," said David Schiegoleit, managing director at U.S. Bank Private Client Reserve. "We need to see a decent uptick in third-quarter earnings, an accommodative Fed and continued good employment and housing numbers."

One bright spot in the market was Apple, which jumped 2.55 percent after two carriers reported strong demand for its newest smartphones.

Freeport McMoRan tumbled 8.39 percent on a deal to sell some Gulf of Mexico assets to Anadarko Petroleum, which dipped only 0.35 percent. Some analysts called the $2 billion deal inexpensive.

U.S. stocks briefly trimmed their losses after Nikkei reported that the Bank of Japan could move interest rates further into negative territory.

Declining issues outnumbered advancing ones on the NYSE by a 7.96-to-1 ratio; on Nasdaq, a 4.37-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 3 new lows; the Nasdaq Composite recorded 34 new highs and 47 new lows.

About 8.2 billion shares changed hands on U.S. exchanges, above the 6.3 billion daily average for the past 20 trading days, according to Thomson Reuters data.