U.S. equities fell from Monday’s record highs on Tuesday amid steady, consistent selling pressure. The major catalyst was a stomach churning breakdown in crude oil, which closed near seven-month lows amid a loss of confidence in OPEC’s output freeze deal, a rise in U.S. shale output, tepid gasoline demand, and bloated inventories.

In the end, the Dow Jones Industrial Average lost 0.3%, the S&P 500 gave back 0.7%, the Nasdaq Composite dropped 0.8% and the Russell 2000 lost 1.1%. Treasury bonds were stronger, the dollar climbed again, gold lost 0.3% and crude oil fell 2.1% to test below the $43-a-barrel threshold for the first time since November.

Breadth was heavily negative, with decliners outpacing advancers by a 2.5 to 1 ratio on the NYSE with volume at 86% of the 30-day average. Healthcare led the way with a 0.3% gain while consumer discretionary and energy stocks were the laggards, both down 1.3%.

Chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD) gained 6% on reports the company landed orders from Alienware for its new Ryzen processor, which should boost second-half profits. Watchmaker Fossil Group Inc (NASDAQ:FOSL) gained 1.7% on an upgrade from analysts at Buckingham citing valuations. And Tesla Inc (NASDAQ:TSLA) gained 0.7% on a Bloomberg report the company is close to an agreement to build a factory in Shanghai — thereby avoiding a 25% tax on imported vehicles.

On the downside, Chipotle Mexican Grill, Inc. (NYSE:CMG) fell 7.3% after guiding for slightly higher operating costs. Halliburton Company (NYSE:HAL) fell 1.3%, returning to levels not seen since October, lifting the July $45 HAL puts recommended to Edge Pro subscribers to a 30% gain.

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And on the economic front, the big news was Chicago Federal Reserve president Charles Evans speech at New York University. In it, he expressed concerns about downsides risks to the inflation outlook. During the Q&A that followed, Evans said the Fed could wait until December to raise interest rates again.

Separately, the market continued to digest comments on Monday from NY Fed president Dudley, who noted the current economic expansion has a long way to go, expressed confidence in inflation rebounding to the Fed’s 2% target, and added that halting the Fed’s policy tightening cycle could imperil the economy and potentially cause a recession (which is counter to standard economic theory).

If Monday’s market rally was all about a liquidity injection by the People’s Bank of China, Tuesday’s unpleasantness was all about the very nasty breakdown in crude oil and oilfield stocks represented by the Oil Services ETF.

Traders cited a Reuters article discussing rising Libyan production and increased exports of Nigeria’s Bonny Light. Elsewhere, Morgan Stanley noted identifiable oil inventories increased at a rate of around one million barrels per day in the first quarter of the year. And Bloomberg said oil tanker storage — used for offshore inventory capacity when on-shore facilities get full — has hit a 2017 record.

It’s becoming increasingly clear that OPEC’s late-2016 production freeze agreement isn’t reducing the global oversupply imbalance, as the oil sheiks had hoped, as U.S. oilmen aggressively reduced their cost basis and have been increasing rig count activity as prices rallied out of the February 2016 low. The collapse in gasoline usage, shown in the chart above, is concerning as well not only for the bearish implications for the oil market but because it could be a sign of broader economic woes.

While this is a big-time negative for energy stocks, the broad market cannot ignore it no matter how much the bulls would like to focus on big-cap tech stocks like Amazon.com, Inc. (NASDAQ:AMZN) which tried and failed for the third day in a row to retake the $1,000 threshold.

Because remember: When oil prices suffered a waterfall decline from their 2014 high into the 2016 low, overall corporate earnings suffered a two-year-long recession. And from its 2015 high, the NYSE Composite fell 20.5% into its February 2016 low. A bear market level pullback.

Moreover, U.S. Treasury bonds continue to rally hard — pushing down long-term yields — as fixed-income traders price in a serious slowdown in the economy and nearly fully reverse the post-election “Trumpflation” rally.

That’s been great news for the ProShares Ultra Treasury Bond (NYSEARCA:UBT), which is up 10.1% for Edge subscribers since January.

Conclusion             

As long as energy prices and bond yields keep collapsing, the stock market that has steadfastly refused to suffer even a normal 10% correction (with no major short-term decline since October) is on borrowed time.

Check out Serge Berger’s Trade of the Day for June 21.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers.