The US markets closed lower on Tuesday, with Wall Street slumping in the face of uncertainty around efforts to overhaul tax policy and a downturn in crude-oil futures. The Dow and S&P 500 finished in negative territory for three out of the past four trading sessions, suggesting that a run to records may be cooling somewhat, as investors fret about tax reform and equity valuations. Federal Reserve Chairwoman Janet Yellen admitted that the range of different voices on the central bank's policy-setting committee can be confusing to the public, calling it one of the institution's biggest challenges. The Fed chairwoman said the policy-setting committee has experimented with ways to streamline external communications. One way was attempting to produce a consensus view, having recognized that it would offer greater guidance to the public if instead of displaying at full strength 19 different views on the outlook and appropriate policy. The Fed meets for its next policy-setting meeting on December 12-13 and is widely expected to raise its benchmark interest rate. According to the CME FedWatch Tool, the market is pricing in a 91.2% probability of a 25 basis point rate hike.
Meanwhile, Dallas Federal Reserve President Robert Kaplan is actively considering supporting another increase in short-term interest rates at the central bank's meeting in December. Kaplan added that history has shown that normally when we have a substantial overshoot the Fed ultimately needs to take actions to play catch-up. Kaplan said he was concerned that historically low unemployment rates, which hit a 17-year low in November, required heightened vigilance.
On the economy front, sentiment among small-business owners rose in October as the promise of tax reform buoyed expectations for sales and growth. The optimism tracker from the National Federation of Independent Business rose to 103.8 from 103. In October, four of the index's sub-gauges rose, five declined, and one was unchanged. Separately, the producer price index rose 0.4% in October. Another measure, known as core PPI, rose 0.2% for the third straight month. The core rate strips out food, energy and trade margins. The increase in the PPI pushed the 12-month rate of wholesale inflation up to 2.8%, the highest since February 2012. The 12-month rate of core PPI advanced 2.3% in October, the highest since the series began in August 2014.
The Dow Jones Industrial Average lost 30.23 points or 0.13 percent to 23,409.47, the Nasdaq dropped 19.723 points or 0.29 percent to 6,737.87, and the S&P 500 edged lower by 5.97 points or 0.23 percent to 2,578.87.