Wall Street stocks retreated on Wednesday led by healthcare and materials stocks, while oil prices tumbled about 3.0 per cent on worries about oversupply.

Healthcare shares fell 1.6 per cent, their biggest drop since June 24. Mylan slumped 5.4-per cent to $43.15 after US presidential candidate Hillary Clinton joined a Senate committee in asking why the cost of its allergy treatment EpiPen had soared.

Shares in the materials sector closed 1.2 per cent lower with miners such as Newmont Mining and Freeport-McMoRan the worst performers on the S&P 500 index, losing more than 7.0 per cent, as gold and copper prices slumped.

US interest rate policy

Gold fell to a one-month low as the US dollar firmed and markets looked ahead to a speech by Federal Reserve Chair Janet Yellen on Friday that will be closely watched for further clues on US interest rate policy.

The fall in mining stocks also hit Canadian stocks with the Toronto Stock Exchange’s S&P/TSX composite index ending down 0.94 per cent.

Oil prices tumbled, with US crude oil futures settling $1.33, or 2.77 per cent, lower at $46.77 per barrel, after an unexpected large build up in US crude oil stockpiles renewed worries about oversupply. Brent crude prices were 1.90 per cent, or 95 cents, lower at $49.01.

Yellen’s comments

In the last week of the northern hemisphere summer, world markets are looking ahead to see if Federal Reserve chair Yellen will raise the chances of another interest rate rise this year.

After its first rate hike in a decade last December, the Fed forecast four more rate rises this year, but weak global economic growth and market volatility have delayed any further monetary policy tightening.

In recent weeks though policymakers have again suggested the US economy is strong enough to warrant another hike by year end.

Fed rate hike prospects

Futures markets assign a roughly one-in-five chance a rate rise will occur in September, and 50-50 odds by the end of the year.

“The market over the past several weeks has been in a holding pattern, really not doing much of anything and the reason for that is everyone is waiting to hear what Yellen is going to say,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

On Wall Street, the Dow Jones industrial average fell 65.82 points, or 0.35 per cent, to 18,481.48, the S&P 500 lost 11.46 points, or 0.52 per cent, to 2,175.44 and the Nasdaq Composite dropped 42.38 points, or 0.81 per cent, to 5,217.70.

In Europe on Wednesday, stocks scored consecutive daily gains for the first time in three weeks, drawing support from a weak euro.

The FTSEuroFirst index of the leading 300 European shares closed up 0.3 per cent, having earlier fallen as much as 0.4 per cent, and Germany’s DAX staged a similar rebound to trade up 0.5 percent before paring some gains.

Economic slowdown

Investors’ nerves may have been soothed by signs that the anticipated economic slowdown in Britain from the shock vote in June to leave the European Union had not materialised.

“Brexit? What Brexit?” asked Holger Schmieding, chief economist at Berenberg Bank. “In the rest of the EU, the repercussions of the Brexit vote have been rather mild.”

Sterling rose to a three-week high as speculators further cut bets against the currency after data indicated the economy was holding up after the Brexit vote.

The euro, which had fallen to a fresh one-week low against the US dollar, was last down 0.35 per cent to $1.1264.

US Treasury yields

US Treasury yields inched upwards, but the mood was steady in anticipation of Yellen’s speech. Benchmark 10-year notes fell 2/32 in price to yield 1.56 per cent, up from 1.55 per cent on Tuesday.

The long-dated yield curve had flattened to the lowest in one-and-a-half years on Tuesday. A flattening curve is often seen as a harbinger of low growth, inflation and rates.

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