U.S. equities closed lower Tuesday, pulling back from record highs, as oil prices pressured energy stocks.
The S&P 500 declined 0.67 percent as the energy sector dropped nearly 1.3 percent to lead decliners. The Dow Jones industrial average hit a record before closing 61 points lower, with Disney contributing the most losses. The Nasdaq composite declined 0.8 percent.
U.S. crude for July delivery fell 2.19 percent to settle at $43.23 a barrel amid signs of rising production. Crude also entered a bear market, trading at least 20 percent below its 52-week high.
“$44 was a big area for crude,” said JJ Kinahan, chief market strategist at TD Ameritrade. “Right now, it’s having an impact on stocks but it could be bigger. The next major area of support is around $40.”
Oil prices are “most definitely” heading to $40 a barrel and will likely dip into the upper $30s, John Kilduff, founding partner at energy hedge fund Again Capital, told CNBC’s “Squawk Box.”
“Not only do we have a struggle with production and an ineffectual OPEC, non-OPEC production regime, but you have this overhang again that is not clearing, and so that is what this market is reacting to,” he said.
investors also kept an eye on Washington as they digested remarks from House Speaker Paul Ryan on tax reform. He said the government is cutting back on regulatory red tape and that changes to the tax code must be permanent. Ryan later spoke with CNBC’s “Power Lunch,” saying the U.S. can’t hit 3 percent growth with tax reform.