While you were sleeping: Oil hits stocks, Dow loses 253pts

A three-day rally Wall Street ended, while the US dollar and Treasurys advanced, amid concern about the slide in oil prices.

Shares fell an average of 1.5% on the broader indices, led by a 2.5% fall in energy stocks.

US Treasurys rose, pushing the yield on the benchmark 10-year note five basis points lower to 2.25%.

The greenback strengthened, a day after the Federal Open Market Committee raised the new target range for the federal funds rate to between 0.25% and 0.5%, up from zero to 0.25%. Chairwoman Janet Yellen signalled any further rate hikes will be gradual.

Oil weakened amid concern about the worldwide glut and the global economy. West Texas Intermediate traded 2% lower at $US34.84 a barrel after falling as low as $US34.76, while Brent last traded 20c weaker at $US37.19 a barrel.

"Bearish fundamentals are hanging over the oil markets like storm clouds, with no break in sight or relief in the near future," Chris Jarvis, founder of Caprock Risk Management, an oil market consultancy in Frederick, Maryland told Reuters. "The dollar is moving higher, too."

Dow drops 253 points
On Wall Street, the Dow Jones Industrial Average declined 253.25 points, or 1.4%, to 17,495.84. The S&P 500 fell 1.5% to 2041.89, pushing the index back into negative territory for the year. The Nasdaq Composite also slipped 1.5% to 5002.55.

Declines in shares of Caterpillar and Chevron, which fell 4.2% and 3.1% respectively, led the Dow lower.

"Investors are focusing on some of the lingering issues with regard to stocks: falling price of oil and global weakness," Walter Hellwig, a senior vice president at BB&T Wealth Management in Birmingham, Alabama, told Bloomberg.

"To the extent that there's doubt about earnings increases next year, that's going to cause some concerns in the market. The focus today is on those issues rather than clarity in the Fed's policy, which we really lacked until yesterday."

Shares of Oracle dropped 5.8% after the company posted revenue that fell short of analysts' estimates, while shares of General Mills weakened 3.3% after it reported quarterly earnings that disappointed.

Meanwhile, shares of FedEx climbed 3.3% after the company reported a quarterly profit that exceeded expectations.

"We expect our solid earnings growth to continue in the second half of our fiscal year despite weakness in industrial production," Alan Graf, Jr, FedEx's chief financial officer, said in a statement.

"Our improved financial results are being driven by better revenue quality, e-commerce growth and the successful ongoing execution of our profit improvement initiatives."

The company also said it was dealing with "a record number of holiday shipments-fuelled by the steady rise of e-commerce."

The latest US data showed jobless claims fell to a lower-than-expected 271,000 last week.

Separately the third-quarter current account deficit grew to $US124.1 billion, while the Philadelphia Fed's gauge of manufacturing activity in the region fell to -5.9 in December, down from 1.9 in November.

"The intense headwinds facing the US manufacturing sector continue to linger," Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters.

In Europe, the Stoxx 600 Index ended the session with a 1.4% gain from the previous close. The UK's FTSE 100 Index advanced 0.7%, while France's CAC 40 Index climbed 1.1%, and Germany's DAX Index rallied 2.6%.

UPDATED for the Wall Street close at 10am NZ time

(BusinessDesk)