US stocks fall after two-day winning spree; Dow Jones, Nasdaq slip over 1%

US stocks retreated on Wednesday after strong gains earlier in the week, while oil continued to rebound in price as OPEC+ producers recommended major cuts to oil supply. All three major US stock indices opened the day lower, erasing some of the strong gains stocks posted in the first two days of the fourth quarter.

The Dow Jones Industrial Average was down 1.16 per cent in early trading, while the S&P 500 lost 1.5 per cent and the Nasdaq Composite fell 1.87 per cent. The MSCI world equity index, which tracks shares in 45 nations, was down 0.73 per cent.

Oil prices looked for a third straight day of gains after OPEC+ key ministers, known as the joint ministerial monitoring committee, agreed to cut oil output by 2 million barrels per day.

Brent crude was last up 0.78 per cent at $92.52 a barrel. US crude was last up 0.72 per cent at $87.14 per barrel. US stocks slid one day after the S&P 500 index posted its biggest single-day rally in two years after softer US economic data and a smaller-than-expected interest rate hike from Australia stirred hope for less-aggressive tightening by the Federal Reserve. 

But a more cautious tone surfaced on Wednesday, with a sharp rate rise in New Zealand dampening hopes for a pause or slowdown in aggressive hikes from other major central banks.

“There is a growing sense that the market may have got ahead of itself in thinking that inflation has peaked and central banks will start to dial back on their hawkish stances,” said Stuart Cole, head macro economist at Equiti Capital. “Until we see material falls in CPI I think central banks will remain in hawkish mode and willing to accept a moderation in growth — i.e., mild recession — if that is the price to pay to get the inflation genie back in the bottle,” he added. 

European shares fell, sending the region's STOXX 600 index down 0.8 per cent after a 5 per cent rally in the previous three sessions.

US Treasury yields headed back higher and the dollar steadied, having suffered its heaviest setback in more than two years on Tuesday. The yield on benchmark 10-year Treasuries, had surged to 3.7408 per cent.

The dollar index, which tracks the greenback versus a basket of six currencies, regained 1.14 per cent to 111.317 after two days of sharp declines. Elsewhere, spot gold traded at around $1,709 per ounce, down about 1 per cent.