U.S. stocks closed slightly lower Tuesday, ahead of a likely interest rate hike, as energy stocks fell.
"The continued drop in oil has got stocks rolling over again," said Peter Coleman, head trader at Convergex. "A little out of stocks into bonds."
U.S. crude oil prices briefly fell 2 percent to hit a fresh three-month low after OPEC said oil inventories had continued to rise and Saudi Arabia surprisingly self-reported a jump in production, despite the start of a global deal to cut supply.
Energy was the worst performing S&P 500 sector, and the Energy SPDR ETF (XLE) fell more than 1 percent to hit its lowest since Nov. 7. Chevron had the greatest negative impact on the Dow Jones industrial average.
"Oil begs the question, is this a canary in a coal mine saying global growth isn't as robust as we thought?" said Mike Baele, managing director at U.S. Bank Private Client Reserve.
Dow Jones industrial average year-to-date performance
The Federal Open Market Committee kicked off its two-day meeting Tuesday and is expected to announce a rate increase at the meeting's Wednesday afternoon conclusion.
"What they have following that [rate hike], I think, is what's making people nervous," said JJ Kinahan, chief market strategist at TD Ameritrade. "What will be their new targets?"
Traders mostly bought Treasurys, sending the benchmark 10-year Treasury yield lower near 2.60 percent, after closing Monday at 2.607 percent, its highest since Sept. 2014. The rate-sensitive 2-year yield briefly edged higher to 1.38 percent.
The U.S. dollar index traded about 0.4 percent higher, with the euro around $1.061 and the yen near 114.7 yen against the greenback.