Bloomberg News/Landov
The Dow Jones Industrial Average snapped a six-month winning streak on Wednesday as weak energy shares weighed on the broader market. A batch of economic reports that may potentially add more cause for the Federal Reserve to follow through with recent talk of lifting key interest rates also dampened sentiment.
The Dow DJIA, -0.07% fell 53.42 points, or 0.3%, to close at 18,400.88, down 0.2% for the month. The S&P 500’s SPX, -0.13% five-month rally came to an end, with the large cap index dropping 5.17 points, or 0.2%, to finish at 2,170.95 for a monthly decline of 0.1%.
The Nasdaq Composite Index COMP, +0.07% shed 9.77 points, or 0.2%, to end at 5,213.22, but it bucked the trend to close up 1% in August.
Stocks were pressured all session as crude-oil futures tumbled on the back of a report from the U.S. Energy Information Administration, which showed domestic crude supplies rose by a greater-than-estimated 2.3 million barrels in the week ended Aug. 26.
Crude-oil futures CLV6, -0.81% were down more than 3% following the inventory figures. The Energy Select Sector SPDR XLE, -0.60% fell 1.6%, its steepest one-day decline since Aug. 1.
Aside from weak oil, investors are also taking defensive positions ahead of the nonfarm payrolls report due Friday, according to Brad McMillan, chief investment officer for Commonwealth Financial Network.
“Investors are taking some money off the table, which is normal and a rational response given the Fed, high level of valuations and nervousness over September, the one month in the market when most people lose money,” he said.
Since 1928, the S&P 500 has dropped in September 56% of the time, according to Bank of America Merrill Lynch data.
Private-sector employment data set the tone for stocks, with the U.S. economy adding 177,000 private-sector jobs in August, compared with average estimates from economists polled by MarketWatch of 175,000, according to a report from Automatic Data Processing Inc. ADP, +0.52% The prior month’s private-payroll report also was raised to 194,000 from 179,000.
The ADP data have arguably worked as a precursor for the more closely watched nonfarm payrolls report, but it hasn’t always been an accurate gauge.
Leon Cooperman, chief executive of Omega Advisors, told CNBC on Wednesday that if the jobs report comes in with a payroll rise of more than 200,000, the Fed is likely to raise interest rates as early as September. A number below 100,000 would point to a hike in December, he said.
Economists polled by MarketWatch are projecting jobs growth of 185,000 for this month.
Some investors say the data, particularly ADP, hasn’t really changed the narrative for rate-hike expectations.
“I don’t think that the data gave us a definitive answer one way or another,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, which manages about $240 billion.
The S&P 500 remains stuck in a narrow range with volatility still subdued, which prompted Benjamin Bowler, an analyst at Bank of America Merrill Lynch, to express concerns about investors underpricing risks.
Read: Volatile September will have investors pining for dog days of August
Still, Frank Cappelleri, executive director at Instinet LLC, said that market’s muted moves in August speak more to its strength than weakness. “The fact that the S&P 500 was up 9% from the June lows to start the month, the sideways movement shows resiliency more than anything at this stage,” he said.
In other economic data, pending home sales in July reached the second-highest reading in a decade, as a solid jobs market and low mortgage rates supported buying.
Separately, the Chicago purchasing managers index for August fell 4 points to 51.5 from the previous month.
Fed speakers: In Fed news, Boston Fed President Eric Rosengren and Chicago Fed President Charles Evans appeared at an event in Shanghai and discussed both sides of the Fed debate over raising interest rates.
Rosengren said the Fed is close to achieving its employment and inflation targets, while Evans hinted he was in no rush to tighten policy.
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Movers and shakers: Shares of Palo Alto Networks Inc. PANW, +2.22% sank 7.2% after the cybersecurity firm late Tuesday provided a downbeat outlook for the current quarter.
AeroVironment Inc. AVAV, -2.47% tanked 17% after the drone maker said revenue slumped 23% in the latest quarter.
H&R Block Inc. HRB, +0.60% lost 11% following weaker-than-expected results out late Tuesday.
U.S.-listed shares of Deutsche Bank AG DB, +1.85% gained 2.5% after a report the German lender was considering a merger with rival Commerzbank AG CBK, +5.26% Deutsche Bank chief executive John Cryan, however, talked down the idea of a merger, saying he’s looking to make the bank smaller.
Cisco Systems Inc. CSCO, +0.06% shares fell 0.3% after the tech giant late Tuesday said it would buy ContainerX Inc., an 18-month-old startup that manages software containers for corporate customers.
Other markets: The dollar gained slightly against the yen USDJPY, +0.21% earlier in the session but was mostly flat in recent trade, while gold futures GCZ6, +0.24% turned lower.
Stocks in Asia closed mixed, while European markets were mostly lower.
--Sara Sjolin contributed to this report.
