By Karen Langley and Anna Isaac
U.S. stocks ticked up Tuesday as oil prices retreated from a historic gain and investors looked ahead to an expected cut in interest rates by the Federal Reserve.
Despite continuing fallout from a weekend attack on Saudi Arabian oil facilities and signs of turmoil in the market for repurchase agreements, trading in stocks was relatively quiet. The Dow Jones Industrial Average traded in a narrow range of about 125 points, and trading volumes were below the monthly average.
The blue-chip index gained 33.98 points, or 0.1% to 27110.80. The S&P 500 added 7.74 points, or 0.3%, to 3005.70, as nine of 11 sectors rose. The technology-heavy Nasdaq Composite climbed 32.47 points, or 0.4%, to 8186.02. All three indexes are within 2% of their all-time highs from July.
"As long as the Fed is doing what we expect it to do, and they're accommodative, then the markets will be relatively benign," said Ken Moraif, senior retirement planner at Retirement Planners of America.
After the attack on Saudi oil facilities pushed crude prices to their largest percentage gain on record Monday, investors struggled to calculate the likely impact on global supplies. But Saudi Arabia's oil ministry said Tuesday that the country will soon restore most of its output and will fully recover within weeks.
Brent crude, the global oil benchmark, dropped 6.5% to $64.55 a barrel -- still up from $60.22 at the end of last week. Energy stocks in the S&P 500 were the biggest losers in the session, falling 1.5% after a big rally Monday. Devon Energy and Marathon Oil both declined more than 5%.
"What we are going to watch going forward is to see how these higher oil prices affect the consumer, especially here in the United States, as the U.S. consumer is driving the growth in the economy right now," said Carter Henderson, portfolio specialist at Fort Pitt Capital Group.
In addition to monitoring information about oil supply, investors are looking ahead to the Federal Reserve's policy meeting that concludes Wednesday. Markets are expecting another quarter percentage point interest rate cut, but there will also be scrutiny of how recent developments with Saudi Arabia and trade talks with China might influence future policy.
The U.S. 10-year Treasury yield slipped to 1.805%, from 1.843% Monday. Bond yields fall as prices rise.
Investors were also monitoring the repo market after the Federal Reserve Bank of New York stepped in Tuesday for the first time in more than a decade to relieve pressures that were pushing short-term interest rates higher than the central bank wanted. The Fed moved to put $53 billion of funds back into the banking system. Wednesday's policy decision is unrelated to the recent funding-market strains.
"The expansion's been a story of slow and steady growth," said Craig Birk, chief investment officer at Personal Capital. "There's nothing to us that suggests that has to end anytime soon. The consumer's still doing fine, unemployment's still very low, manufacturing is a bit soft but not terrible."
New data Tuesday showed U.S. industrial production rebounded sharply in August, a sign that is likely to ease worries about a manufacturing-driven economic downturn.
In China, the Shanghai Composite dropped 1.7% and Hong Kong's Hang Seng fell 1.2% as the People's Bank of China remained restrained in its response to a recent spate of weak economic data. The central bank on Tuesday disappointed economists who had hoped it would move to effectively lower interest rates, though it took steps to inject 200 billion yuan ($28.3 billion) into the banking system.
"Because there was an injection of cash people were looking at the PBOC closely. There was some surprise that there wasn't a cut now. In recent history, they tend to keep pace with the Fed, but they could still do that in the coming days," said Freya Beamish, chief Asia economist at Pantheon Macroeconomics.
China's central bank officials will be more focused on trade talks with the U.S. in October than on a cut in rates, Ms. Beamish said.
Despite the gloom, Japan's Nikkei edged up 0.1% as President Trump moved ahead with a trade pact with the country on areas such as digital technology and agriculture. The step should see some tariffs on Japanese imports to the U.S. lowered.
Write to Anna Isaac at email@example.com