Wall Street slips from record levels on weak oil prices

Wall Street

By Yashaswini Swamynathan

(Reuters) - U.S. stocks slipped from their record levels on Monday as oil weighed on energy shares and as investors awaited this week's Federal Reserve monetary policy meeting.

Oil prices fell to two and a half month lows amid worries that a global glut of crude and refined products would weigh on markets for some time. [O/R]

The energy index (SPNY) fell 1.7 percent, making it the worst performer among the 10 major S&P indexes that were trading lower.

Exxon and Chevron fell about 1.4 percent, dragging down the S&P and the Dow.

"Second-quarter earnings have come in stronger than we had expected, but for some reason the markets have chosen to obsess about oil prices today," said Kim Forrest, senior equity research analyst, Fort Pitt Capital Group in Pittsburgh.

"It is almost as if the markets can hold only one thought in its head."

Low expectations of rate hikes, robust economic data and higher-than-expected second-quarter earnings have fueled a record-setting rally on Wall Street in the past two weeks.

Investors are now pinning their hopes on an improvement in corporate earnings to justify the market's valuation.

Earnings of S&P 500 companies are expected to fall 3.7 percent, compared with a 5 percent decline expected at the start of the earnings season, according to Thomson Reuters data.

The Federal Open Market Committee (FOMC), which has had to defer raising interest rates, will begin its two-day meeting on Tuesday to decide whether the U.S. economy could absorb a rate increase in the near term. The FOMC is scheduled to announce its decision on Wednesday at 2:00 p.m. ET (1800 GMT).

Even with recent data pointing to the U.S. economy being on strong footing, the Fed is still cautious about pulling the trigger due to global uncertainty sparked by Britain's vote to leave the European Union.

Traders have priced in a 14.7 percent chance of a rate hike in September and a 38.5 percent chance in December, according to CME Group's FedWatch tool.

At 10:51 a.m. EDT the Dow Jones Industrial Average was down 85.77 points, or 0.46 percent, at 18,485.08.

The S&P 500 (SPX) was down 9.35 points, or 0.43 percent, at 2,165.68.

The Nasdaq Composite was down 6.21 points, or 0.12 percent, at 5,093.95.

Yahoo's shares were down 1.8 percent at $38.66, after agreeing to sell its core internet business to Verizon for $4.8 billion. Verizon's shares fell 0.4 percent.

Wireless carrier Sprint shares soared 20.3 percent to $5.56 after its first-quarter revenue beat estimates and the company said it had enough money to fund its business this year.

Declining issues outnumbered advancing ones on the NYSE by 1,793 to 1,006. On the Nasdaq, 1,541 issues fell and 1,085 advanced.

The S&P 500 index showed 24 new 52-week highs and no new lows, while the Nasdaq recorded 61 new highs and 10 new lows.