Stocks falter as oil slides to its lowest price of 2017

U.S. stock indexes retreated from their record heights Tuesday after a slump in the price of oil weighed on energy companies.

The Standard & Poor’s 500 index slid 16.43 points, or 0.7%, to 2,437.03, and the Dow Jones industrial average fell 61.85 points, or 0.3%, to 21,467.14. Both the S&P 500 and Dow had set records Monday thanks to big gains from technology stocks.

The Nasdaq composite declined 50.98 points, or 0.8%, to 6,188.03. The Russell 2000 index of small-cap stocks slumped 15.11 points, or 1.1%, to 1,402.97.

Losses were widespread across the market, with five stocks dropping on the New York Stock Exchange for every two that rose. Many of the sharpest declines were concentrated in the energy sector.

The price of oil touched its lowest price since mid-November.

Benchmark U.S. crude fell 97 cents, or 2.2%, to $43.23 a barrel. Brent crude, the international standard, fell 89 cents to $46.02 a barrel.

The price of oil has been sloshing between $40 and $55 a barrel for much of the last year, down from a peak of more than $110 in the summer of 2013. Drillers have gotten much better at pulling oil from the ground, which has helped supplies to balloon and correspondingly weighed on prices. Many oil-producing countries have banded together to cut production in hopes of limiting supplies, but analysts are skeptical about how much they can influence prices.

A main reason the stock market has climbed to record after record this year has been the resurgence in profit growth for big companies, and the energy sector is expected to play a leading role in that. Analysts forecast energy companies in the S&P 500 will report better than 300% growth in their earnings per share this year. But if the price of oil keeps dropping, that’s at risk.

John Manley, chief equity strategist at Wells Fargo Funds Management, is still optimistic that expectations for earnings across the market can keep rising. Lower oil prices would undercut profits for energy stocks, but lower fuel bills should help other industries. And as long as profits continue to rise, Manley says stocks can too.

“Earnings are starting to re-accelerate,” he said. “It may stop tomorrow, and if it does, well, I’ll change my mind tomorrow. But right now, earnings are growing.”

Tuesday’s slump for oil led shares of Transocean to drop 4.2% to $8.20 and Marathon Oil to sink 3.4% to $12.06.

The worst-performing stock in the S&P 500 was Chipotle Mexican Grill, which slid 7.3% to $425.60 after analysts cut their profit estimates for the restaurant chain. Chipotle said marketing costs will eat up a slightly bigger cut of revenue this quarter than in the first three months of the year.

On the opposite end was homebuilder Lennar, which rose 2.1% to $53.87 after reporting stronger revenue and earnings for the latest quarter than analysts expected.

Parexel International, a biopharmaceutical services provider, jumped 3.7% to $87.04 after it said it will go private following a buyout by Pamplona Capital Management.

Reliance Steel & Aluminum fell 3.7% to $69.84 after the Los Angeles company lowered its forecast for second-quarter earnings, citing “challenging market conditions.”

Tesla edged up 0.7% to $372.24 after Bloomberg News reported that the electric car maker is close to an agreement to produce vehicles in China for the first time.

Bond prices rose, which caused yields to fall. The yield on the 10-year Treasury note sank to 2.15% from 2.19%. The two-year yield dropped to 1.34% from 1.36%, and the 30-year yield fell to 2.73% from 2.79%.

The British pound fell to $1.2629 from $1.2729 after the Bank of England cooled market expectations that it may soon raise interest rates.

The euro fell to $1.1128 from $1.1147. The dollar fell to 111.41 yen from 111.54 yen.

In the commodities markets, gold fell $3.20 to settle at $1,243.50 an ounce, silver fell 9 cents to $16.42 an ounce, and copper fell 4 cents to $2.55 a pound.

Natural gas rose a penny to $2.91 per 1,000 cubic feet. Heating oil fell 2 cents to $1.39 a gallon. Wholesale gasoline fell 3 cents to $1.42 a gallon.

In overseas markets, the French CAC 40 slipped 0.3%, the German DAX lost 0.6% and the FTSE 100 fell 0.7%. The Japanese Nikkei 225 rose 0.8%, the Hang Seng in Hong Kong fell 0.3% and South Korea’s Kospi slipped 0.1%.

UPDATES:

3:30 p.m.: This article was updated with closing prices, context and analyst comment.

7:55 a.m.: This article was updated with market prices and context.

This article was originally published at 6:50 a.m.