U.S. stocks extended their losses in early afternoon trading on Tuesday, slipping from record levels, as a sharp drop in oil prices squeezed energy stocks and a rebound in technology shares faded out.
Oil prices nosedived to seven-month lows after news of increases in supply by several key producers, a trend that has undermined attempts by OPEC and other producers to support the market through reduced output.
Oil majors Chevron and Exxon were down about 1.5 percent and were among the biggest drags on the Dow and the S&P 500.
The S&P energy sector’s 1.7 percent fall led the decliners.
Both oil benchmarks — U.S. crude and Brent — are down more than 15 percent since late May, raising concerns that prices could fall further in the near-term.
“Oil prices are now approaching bear market territory and that, psychologically, has a big impact on Wall Street,” said Adam Sarhan, chief executive officer at 50 Park Investments in Florida.
“If oil prices collapse, the message the oil market is sending is that demand is drying up and global economic growth is waning.”
At 12:49 p.m. ET, the Dow Jones Industrial Average was down 33.44 points, or 0.16 percent, at 21,495.55, the S&P 500 was down 12.05 points, or 0.49 percent, at 2,441.41.
The Nasdaq Composite was down 36.55 points, or 0.59 percent, at 6,202.46.
A recovery in technology stocks also appeared to have lost momentum, adding to the overall weakness.
“Investors are hunting for value and while the ‘buy-the-dip’ crowd showed up when tech stocks fell, we are seeing a mini-rotation among sectors where underperforming sectors such as health-care and biotech stocks are being snapped up right now,” said Sarhan.
The health index was the only gainer among the 11 major S&P sectors, with a rise of 0.62 percent.
The S&P technology sector was down 0.5 percent, with big tech names such as Apple and Microsoft dragging on the S&P and Nasdaq.
The sector had posted two straight weeks of losses on concerns regarding valuation and a move into defensive sectors in a rising-interest-rate environment.
On Tuesday, Boston Fed President Eric Rosengren said that the era of low interest rates in the United States and elsewhere poses financial stability risks and that central bankers must factor such concerns into their decision-making.
Among stocks, Lennar rose 1.8 percent to $53.66 after the No. 2 U.S. homebuilder reported a higher-than-expected quarterly profit. D.R. Horton was up 1.3 percent, while Pultegroup rose 0.7 percent.
Chipotle fell 6.3 percent to $429.86 after the burrito chain said its operating costs in the second quarter will be slightly higher than the first quarter.
Declining issues outnumbered advancers on the NYSE by 2,095 to 736. On the Nasdaq, 1,948 issues fell and 862 advanced.