Energy stocks a drag on markets

U.S. stocks finished the session lower as a surge in optimism over trade talks with China was offset by a plunge in crude prices. The pound rallied on reports of advancement toward a Brexit deal.

The S&P 500 ended Tuesday well off the day’s highs as West Texas crude hit a nine-month low, falling the most since 2011, after U.S. President Donald Trump criticized Saudi Arabia’s plan to cut output. The Dow Jones Industrial Average slid as Exxon Mobil and Chevron dropped. Treasuries climbed and the dollar fell from an 18-month high.

Stock indexes spent the morning on an upswing after White House economic adviser Larry Kudlow told CNBC that the U.S. and China are talking on “all levels” of government. That followed an overnight report that China’s Vice Premier Liu He will pave the way for a meeting between the leaders of the two biggest economies later this month. Caterpillar, 3M and megacap technology shares that react to trade headlines paced those gains in major equity benchmarks.

“What I think is going on in the market is a bit of a consolidation of the activity that took place yesterday. It’s a little bit of a repositioning of people’s portfolios,” said Steve Ricchiuto, chief U.S. economist at Mizuho Americas. “It’s reflected in very little price change and thin market behavior, a market where you’re seeing a rotation within asset classes.”

Britain’s pound surged after three days of losses as the U.K. and the European Union agreed on a draft Brexit divorce deal. Trade worries and Brexit negotiations have hung over markets for months, clouding the economic outlook and helping compound an ongoing sell-off in equities. While comments from Chinese Premier Li Keqiang in Singapore Tuesday hinted at a more optimistic outlook, sentiment overall remains fragile as the Federal Reserve pursues its path of policy normalization and tech companies continue to slide.