A drop in oil prices further hampered sentiment after the International Energy Agency warned of slowing growth in demand.
Futures for the Dow Jones Industrial Average YMZ6, -0.61% slumped 124 points, or 0.7%, to 18,123, while those for the S&P 500 index ESZ6, -0.63% lost 14.15 points, or 0.7%, to 2,137.75. Futures for the Nasdaq-100 index NQZ6, -0.60% lost 28.25 points, or 0.6%, to 4,735.75.
U.S. stocks closed near intraday highs on Monday after comments from Federal Reserve Gov. Lael Brainard calmed market fears that the central bank will raise interest rates soon. The S&P 500 index SPX, +1.47% rallied 1.5%, while the Dow average DJIA, +1.32% jumped 1.3%.
Brainard said the Fed should be cautious in tightening policy to avoid getting trapped in a low-growth, low-inflation environment.
Hawkish comments from Boston Fed President Eric Rosengren last week spurred expectations for a move by Fed policy makers at their Sept. 20-21 meeting. However, after Brainard’s remarks, the probability of a rate hike next week fell to 15% from around 24%, according to the CME FedWatch Tool.
The conflicting messages have left traders struggling to assess just where the Fed stands.
“With a number of dissenting voices ... the future is still unclear, and it remains to be seen if investors have the desire to push markets higher amid the backdrop of political and economic uncertainty,” said Andy McLevey, head of dealing at stockbroker Interactive Investor, in a note.
“With the volatility of late set to continue, this may throw up trading opportunities at stock level for the shrewd investor,” he added.
There are no Fed speakers on tap for Tuesday, as the central bank has entered its “blackout” period ahead of the September meeting.
Other economic news: On the data calender, the NFIB small-business index for August comes first, at 6 a.m. Eastern Time. It is followed by a reading on real household income for 2015 at 10 a.m. Eastern.
At 2 p.m. Eastern, the Federal budget for August is due.
See: MarketWatch’s economic calender
Oil blues: Oil prices moved sharply lower after the International Energy Agency warned demand growth is slowing at a faster pace than initially predicted. The warning comes just a day after the Organization of the Petroleum Exporting Countries said output from producers outside the cartel is stronger than expected.
Crude oil futures CLV6, -2.48% slumped 2.2% to $45.26 on Tuesday following the IEA report, while Brent futures LCOX6, -2.15% fell 1.8% to $47.44 a barrel.
The VelocityShares 3x Long Crude ETN UWTI, +0.97% slid 5% in premarket trade.
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Movers and shakers: Shares of Intersil Corp. ISIL, +2.07% jumped 7.8% ahead of the bell after Japanese chip maker Renesas Electronics Corp. 6723, +2.16% said it’ll buy the U.S. semiconductor maker for $3.2 billion.
Shares of Anadarko Petroleum Corp. APC, +0.12% could also be active, after the oil and gas company late Monday said its board of directors has agreed to buy the deepwater Gulf of Mexico assets of Freeport McMoRan Oil & Gas for $2 billion.
Other markets: The dollar inched higher against other major currencies, sending the ICE Dollar Index DXY, +0.13% 0.1% higher to 95.185. Gold GCZ6, +0.43% was slightly lower, while other metals rose.
Stocks in Asia closed mixed, while European equities struggled for direction.