Technology shares pulled Wall Street to a lower close and oil prices soared on Tuesday, as investors looked ahead to key inflation data, which could provide clues regarding the way forward for the U.S. Federal Reserve's monetary policy.
All three major U.S. stock indexes lost ground on the day, with Oracle (ORCL.N) weighing on sentiment after the cloud services company forecast weaker-than-expected current quarter revenue, hinting at a broader softening of demand.
Energy (.SPNY) shares, boosted by rising crude prices, jumped 2.3% and helped keep the blue-chip Dow's decline nominal.
"It feels like a late summer day because everyone's waiting for something to happen and they're not getting a lot of direction from the markets," said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. "Money is looking for the next horse to jump on in this race to year-end."
At the forefront of market participants' minds is the crucial Consumer Price Index (CPI) report expected on Wednesday, which should shed further light on the meandering, downward path of inflation and provide some clarity regarding the direction of key interest rates.
While core CPI is seen cooling, rising fuel costs are forecast to result in hotter headline inflation, which is unlikely to escape the Fed's attention.
One week from today, the central bank is due to convene its two-day policy meeting, which is broadly expected to culminate in an interest rate pause.
"People are in a holding pattern waiting to understand policy, and policy goes back to inflation, the labor market, prices and consumer demand," said Bill Merz, head of capital markets research at U.S. Bank Wealth Management in Minneapolis. "The Fed is also in wait and see mode, they need to see how data evolves before claiming victory."
"(The Fed has) made good progress so far; it's that last mile of getting (inflation) from 3% or 4% to 2%, that's grabbing the attention of investors," Merz added.
The Dow Jones Industrial Average (.DJI) fell 17.73 points, or 0.05%, to 34,645.99, the S&P 500 (.SPX) lost 25.56 points, or 0.57%, to 4,461.9 and the Nasdaq Composite (.IXIC) dropped 144.28 points, or 1.04%, to 13,773.62.
European shares posted a modest loss, pulled lower by tech weakness in the wake of Oracle's revenue forecast and as investors took a cautious stance ahead of the CPI data.
The pan-European STOXX 600 index (.STOXX) lost 0.18% and MSCI's gauge of stocks across the globe (.MIWD00000PUS) shed 0.39%.
Emerging market stocks lost 0.13%. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) closed 0.12% lower, while Japan's Nikkei (.N225) rose 0.95%.
Oil prices rose to a near 10-month high, driven by a tighter supply outlook and a sunny global demand outlook from OPEC, extending the summer-long gains that have resulted in inflationary pressures.
U.S. crude rose 1.78% to settle at $88.84 per barrel, while Brent settled at $92.06, up 1.57% on the day.
The greenback rebounded against a basket of world currencies as the yen backed away from recent gains due to comments from Japan's top banker suggesting a possible end to its negative interest rate policy.
The dollar index (.DXY) rose 0.15%, with the euro down 0.2% to $1.0726.
The Japanese yen weakened 0.37% versus the greenback at 147.14 per dollar, while sterling was last trading at $1.249, down 0.15% on the day.
U.S. Treasury yields were range-bound, with the two-year note inching above 5% in advance of the Labor Department's CPI report.
Benchmark 10-year notes last rose 4/32 in price to yield 4.2722%, from 4.288% late on Monday.
The 30-year bond last rose 15/32 in price to yield 4.3492%, from 4.377% late on Monday.
