Wall St falls on government shutdown fears, oil swoon

US stocks gave up their gains on Tuesday as energy stocks were weighed by a steep drop in oil prices and as the possibility of a partial government shutdown loomed.

US Senate Majority Leader Mitch McConnell said Democrats had rejected his spending bill proposal. Without the passage of a spending bill, several government agencies are at risk of a shutdown.

Meanwhile, oil prices tumbled more than 5% on concerns of US oversupply. S&P 500 energy stocks fell 2.4% as a result.

“In the short run, there’s a heightened state of anxiety based off of whether there’s a government shutdown or not, which is adding a layer of uncertainty to overall financial markets as well as the US economy,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey.

The benchmark S&P 500 ended Monday at a 14-month low. The index has struggled to hold onto gains in a particularly volatile December in the backdrop of worries about global growth, rates and the China-US trade war.

Even as US stocks rose earlier in Tuesday’s session, both US Treasury prices and the Cboe Volatility Index, often referred to as Wall Street’s “fear gauge,” rose.

“That tells me it’s a very, very nervous market,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.

The Federal Open Market Committee began a two-day meeting in which it will decide upon its course of interest-rate hikes, on Tuesday. Market participants widely expect the Fed Reserve to raise benchmark US rates this month, but some investors anticipate that the US central bank will indicate fewer rate hikes for 2019 than previously expected.

The Dow Jones Industrial Average fell 28.22 points, or 0.12%, to 23 564.76, the S&P 500 lost 12.2 points, or 0.48%, to 2 533.74 and the Nasdaq Composite dropped 4.65 points, or 0.07%, to 6 749.08.

Despite Tuesday’s losses, several stocks managed to reverse a pattern of declines.

Goldman Sachs shares rose 1.7% to snap a nine-day losing streak related to the 1MDB scandal.

Shares of Boeing Co rose 3.5% after three days of losses as the aerospace company said it was raising its dividend and increasing share buybacks to $20 billion from $18 billion.

Johnson & Johnson rose 0.7%, after a near 13% drop over two days on a Reuters report that J&J knew for decades that its Baby Powder contained asbestos.

Declining issues outnumbered advancing ones on the NYSE by a 1.18-to-1 ratio; on Nasdaq, a 1.43-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 84 new lows; the Nasdaq Composite recorded eight new highs and 479 new lows.