Stock market closes lower as oil slips into bear-market territory

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It was a gloomy day for crude oil.

U.S. stocks finished lower Tuesday as investors dumped energy shares after crude-oil prices sank into bear-market territory.

The S&P 500 SPX, -0.67%  dropped 16.43 points, or 0.7%, to close at 2,437.03, with nine of the 11 main sectors trading lower. The energy sector was down 1.3%, topping the losers.

Crude oil CLN7, -1.95% sank to a 10-month low, falling 2% as ongoing worries about a supply glut pressured prices.

Shares of oil companies were among the worst performers. Transocean Ltd.RIG, -4.21%  shed 4.2%, Marathon Oil Corp. MRO, -3.44%  declined 3.4% and Hess Corp. HES, -3.19%  was down 3.2%.

The Dow Jones Industrial Average DJIA, -0.29%  fell 61.85 points, or 0.3%, to end at 21,467.14 after touching an intraday record of 21,535.03. Chevron Corp.CVX, -0.91% fell 0.9%, while Verizon Communication Inc. VZ, -1.35%  was off 1.4%.

The Nasdaq Composite Index COMP, -0.82%  slid 50.98 points, or 0.8%, to close at 6,188.03. The tech-heavy index has moved sharply lower over the past two weeks on concerns the high-value tech industry is in a bubble.

“Overall it’s a quiet market, but there are a lot of moving parts,” said Quincy Krosby, chief market strategist at Prudential Financial.

Investors are keeping an eye on the parade of Federal Reserve speakers to get a handle on the central bank’s stance on future rate increases as well as politics, she said

In a speech in Amsterdam to a conference co-sponsored by the central banks of Sweden and the Netherlands, Boston Fed President Eric Rosengren said lower rates may be a more permanent feature on the economic landscape because they reflect broad population trends.

Rosengren’s remarks come after the Fed last week raised interest rates by a quarter of a percentage point and outlined a plan for shrinking its massive balance sheet.

Separately, Chicago Fed President Charles Evans said late Monday the central bank could be done raising rates this year. He reiterated those comments during talks on Tuesday on CNBC and with The Wall Street Journal. He said he supports the current policy of “very gradual” interest-rate hikes and a slow reduction of the balance sheet. Earlier on Monday, New York Fed President William Dudley struck a hawkish tone, arguing against slowing the pace of interest-rate increases.

There are fears that higher interest rates will trigger a market move into so-called defensive plays. Defensive stocks are shares of companies that manufacture products or provide services viewed as essential regardless of the economic cycle, such as consumer staples and utilities.

Meanwhile, the outcome of the special election in Georgia may have an impact on the market as it could serve as a proxy test of support for GOP candidates after Trump, according to Krosby.

“If Karen Handel takes the seat, it will be a confirmation that the president’s agenda can go forward while a win by the Democrat candidate [Jon Ossoff] could be a tailwind into the 2018 [midterm] congressional election,” she said.

In a speech to manufacturers in Washington on Tuesday afternoon, House Speaker Paul Ryan expressed confidence that Republicans can deliver on promises of a major tax overhaul this year, despite a range of challenges facing his party. He told CNBC during an interview after his speech that completing tax reform was crucial to getting gross domestic product anywhere near a 3% growth rate.

Hopes for a groundbreaking tax shake-up were partly behind the so-called Trump trade that lifted stocks sharply after the election in November. However, after the Republicans struggled with pushing through their health-care reform earlier this year, investors started to scale back expectations of imminent changes.

On the economic docket for Tuesday, the current-account deficit for the first quarter rose by 2.5%. to $116.8 billion in first quarter. See:MarketWatch’s economic calendar

Stock movers: Tesla Inc. TSLA, +0.50%  rose 0.7% after the electric-car maker was found “not guilty” in a May 2016 fatal crash.

Shares of Lennar Corp. LEN, +2.14%  climbed 2.1% after the home builder reported fiscal second-quarter results that were well above expectations. Rivals D.R. Horton Inc. DHI, +0.95%  rose 1% and PulteGroup Inc. PHM, +0.29%  edged up 0.3%.

Shares of Chipotle Mexican Grill Inc. CMG, -7.26% dived 7.3% after the burrito chain said Monday that it is spending more on marketing as it looks to recover from its E.coli crisis.

Other markets: Asian stocks closed mixed, with Japan’s Nikkei 225 indexNIK, -0.45%  rising for a third straight day and European markets were mostly lower.

The ICE Dollar Index DXY, -0.02%  rose 0.2% as investors digested the latest Fed news and gold GCQ7, +0.27%  settled marginally lower.