Market Snapshot: Dow futures tumble more than 100 points as mood for risk sours

Dow futures tumbled more than 100 points on Wednesday, as falling oil prices and worries over the progress of a U.S. tax overhaul left investors increasingly averse to putting more money into perceived riskier assets such as equities, which have been on a record run.

Important economic updates are ahead, with consumer prices and retail sales numbers expected before the open.

What are the main benchmarks doing?

Dow Jones Industrial Average futures YMZ7, -0.59%  slid 127 points, or 0.5%, to 23,252, while S&P 500 futures ESZ7, -0.56% dropped 13.4 points, or 0.5%, to 2,564.25. Nasdaq-100 futures NQZ7, -0.54%  fell 33.75 points, or 0.5%, to 6,260.

U.S. stocks finished modestly lower on Tuesday, driven south by uncertainty over a tax overhaul out of Washington and as crude prices pitched lower. The S&P 500 SPX, -0.23%  closed down 0.2% to 2,578.87, while the Dow DJIA, -0.13%  dropped 0.1% to 23,409, and the Nasdaq Composite COMP, -0.29%  lost 0.3% to reach 6,737.87.

What could drive markets?

Weak oil prices again weighed on investor appetite for riskier assets. West Texas Intermediate crude CLZ7, -1.08%  fell 46 cents, or 0.8%, to $55.81 a barrel, while Brent crude LCOJ8, -1.10%  dropped 44 cents, or 0.7%, to $61.25 a barrel after the American Petroleum Institute late Tuesday reported a surprising buildup in U.S. inventories of both crude oil and gasoline. The API data comes ahead of important Energy Information Administration data due Wednesday.

Analysts polled by S&P Global Platts expect the EIA to report declines of 1 million barrels each for crude and gasoline inventories, but investors are concerned the data could now surprise with buildups.

Crude prices were already under pressure Tuesday, with both WTI and Brent settling at their lowest levels since Nov. 3. The move lower came after the International Energy Agency cut its global crude-demand forecasts and warned of a boom for U.S. shale-oil production.

See Thomas Kee on: To make money in oil, listen to prices more than news

Meanwhile, concerns over the progress of U.S. tax reform in Washington were lingering on Wednesday, after a report Tuesday that Republican senators are strongly considering adding a repeal of Obamacare’s individual insurance mandate to a new version of their tax bill. That was pressing on the U.S. dollar — the ICE Dollar Index DXY, -0.29%  dropped 0.3% to 93.538.

Read: Here’s what happens if Obamacare mandate is repealed, as Senate is considering

What are strategists saying?

• “I don’t think there’s any particular reason behind the moves, rather a few factors — taxes, oil declines being among them — that are combining to trigger some profit-taking on what has been a long and steady rally,” said Craig Erlam, senior market analyst at Oanda, in emailed comments, of the fall for U.S. stock futures.

“U.S. indices have looked vulnerable to this for a couple of weeks, and while [I] don’t anticipate a particularly large correction at this point, a small pullback would be healthy,” said Erlam.

• “Unfortunately for dollar bulls, today’s reports are leaving little room for a positive reading: Inflation is expected to print lower this month, and this would cast doubts on whether the Fed should continue to raise rates at its current pace during the 2018,” said Konstantinos Anthis of the ADS Securities research team.

“At the same time, retail sales are also expected to come in lower, and the important question now becomes how low can the dollar go if today’s data are on the bearish side,” Anthis said in a note to clients.

• “The goal of adding the Obamacare repeal into the mix is to propose a financing solution for the major tax reforms, but of course the joint-proposal on two controversial subjects could also decrease their chances of success for passing the bill on the Congress,” said Ipek Ozkardeskaya, senior market analyst at LCG.com, in a note to clients.

What economic data are coming?

Investors were bracing for a heavy lineup of economic updates. Readings on consumer prices and retail sales for October, as well as the Empire State manufacturing index for November, are all due at 8:30 a.m. Eastern Time.

Check out: MarketWatch’s Economic Calendar

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