US STOCKS-Oil drop saps gains as Wall St fades late

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* New York nearing plateau in hospitalized patients -
governor
* S&P 500 set for best two-day gain in nearly two weeks
* Energy index leads gains among major S&P 500 sectors
* Dow down 0.12%, S&P 500 down 0.16%, Nasdaq down 0.33%

(Updates to market close)
By Chuck Mikolajczak
NEW YORK, April 7 (Reuters) - Wall Street fell on Tuesday,
as a drop in oil prices steepened in the latter stages of the
session and erased early gains built on tentative signs that
coronavirus outbreaks in some of the biggest U.S. hot spots may
be leveling.
The S&P initially appeared poise to add to a 7% jump on
Monday, after health officials said the pandemic may kill fewer
Americans than indicated in recent projections. Governor Andrew
Cuomo said New York, the epicenter of the virus in the United
States, was nearing a plateau in the number of patients
hospitalized. "The market sees some hint of good news in terms of the
virus. We know we've got the Fed and a lot of stimulus, fiscal
stimulus coming," said Scott Wren, senior global market
strategist at Wells Fargo Investment Institute in St. Louis,
Missouri.
Energy .SPNY and materials .SPLRCM were the best
performing sectors, with an aggressive round of U.S. fiscal and
monetary stimulus in the past month helping to boost risk
appetite for the majority of the session.
Still, a decline in oil prices steepened, as U.S. crude
CLc1 settled down more than 9% as supplies swell and investors
tempered expectations for a quick agreement on output cuts
between major producers. Investors also braced for worsening
economic data and corporate earnings in the coming weeks.
"Oil is important because about 20% of the high yield bond
market is energy. The energy sector has tens of thousands of
high paying jobs and there's a lot of capital expenditure that
happens in the sector too," said Wren.
The Dow Jones Industrial Average .DJI fell 26.13 points,
or 0.12%, to 22,653.86, the S&P 500 .SPX lost 4.27 points, or
0.16%, to 2,659.41 and the Nasdaq Composite .IXIC dropped
25.98 points, or 0.33%, to 7,887.26.
The S&P 500 is up 18.9% from its March 23 intraday low, but
remains 21.5% below its mid-February record high as methods
designed to contain the virus quashed demand across a swath of
industries such as airlines, automakers and hotels.
Wall Street's fear gauge .VIX has steadily retreated from
12-year peaks in recent days, but volatility is expected to
remain elevated as companies prepare to report an expected slide
in first-quarter earnings and outline more drastic plans to
bolster cash reserves.
Analysts now expect first-quarter earnings for S&P 500 firms
to fall 6.4% compared to a Jan. 1 forecast for a rise of 6.3%.
Exxon Mobil XOM.N throttled back a multi-year investment
spree in shale, LNG and deep water oil production, saying it
would cut planned capital spending this year by 30% as the
pandemic saps energy demand. Oilfield services firm Halliburton Co HAL.N said it would
cut about 350 jobs in Oklahoma and that its executives would
reduce their salaries. Exxon shares climbed 1.90% and Halliburton rose 1.64%,
helping the energy sector move higher even as crude prices fell.
Advancing issues outnumbered declining ones on the NYSE by a
2.71-to-1 ratio; on Nasdaq, a 1.30-to-1 ratio favored advancers.
The S&P 500 posted 4 new 52-week highs and no new lows; the
Nasdaq Composite recorded 9 new highs and 26 new lows.
Volume on U.S. exchanges was 13.92 billion shares, compared
to the 15.42 billion average for the full session over the last
20 trading days.