The Dow Jones Industrial Average retreated again on Wednesday, its first three-day decline since January, as crude oil suffered its largest drop in more than a year.
The Dow slid 0.33%. The S&P 500 was down 0.23%, and the Nasdaq increased 0.06%.
Losses in crude oil accelerated this afternoon to close at their lowest level of the year. Crude oil prices fell on Wednesday after another rise in domestic inventories. The Energy Information Administration reported U.S. stockpiles added 8.2 million barrels of crude in the past week. The increase was four times what analysts expected. Commercial inventories rose to an all-time high of 528.4 million barrels.
"The rising crude inventory levels in the U.S. to new all-time highs has been the number one reason why prices have been unable to move further higher after the [Organization of Petroleum Exporting Countries] had agreed with some non-OPEC members to limit production back in November," said Fawad Razaqzada, technical analyst at FOREX.com.
West Texas Intermediate crude was down 5.4% to $50.28 a barrel on Wednesday, its lowest level since early December and its steepest decline in 13 months.
The energy sector was one of the worst performers on markets Wednesday. Exxon Mobil (XOM) , Royal Dutch Shell (RDS.A) , Chevron (CVX) , PetroChina (PTR) and Total (TOT) were all lower, while the Energy Select Sector SPDR ETF (XLE) fell 2.5%.
A reading on the U.S. labor market blasted past economists' estimates and clocked in at its highest level since April 2014. The U.S. private sector added 298,000 jobs in February, according to the ADP National Employment Report, blowing past a target of 189,000. Construction jobs increased by 66,000, while manufacturing rose by 32,000.
The ADP report comes two days ahead of the official U.S. nonfarm payrolls report out on Friday. The jobs report for February, the first full month in Donald Trump's economy, will be picked apart by investors eager to discern the likelihood of an interest rate hike from the Federal Reserve next week. Signs point to a robust report, proof that the president inherited a solid economic foundation from predecessor Barack Obama despite Trump's calls to the contrary.
"In past research, we've found that large surprises in the ADP report tend to be predictive of the subsequent nonfarm payroll surprise, and we believe the sharp acceleration in today's report provides additional evidence for a strong employment report this Friday," Goldman Sachs analysts wrote in a report.
Friday's nonfarm payrolls report should be enough for the Federal Reserve to determine whether to make a move higher on rates at its meeting next week. Fed members have turned hawkish in recent months, calling the March meeting a "live" one and telegraphing more than one rate hike this year. The chances of a 25-basis-point hike next week currently sit at 86%, according to CME Group fed funds futures.
The Federal Open Market Committee, the group that decides when interest rates will move, next meets on March 14-15.
Stocks fell on Tuesday for a second day, the first back-to-back decline since January, as a selloff in health care spoiled attempts by the market to push higher. Stocks have churned since setting new record heights a week ago as investors wait for Friday's market-moving jobs report and a meeting of the Federal Open Market Committee next week.
"The bullish view is that this is just some healthy consolidation after the big run following the election back in November," wrote James "Rev Shark" Deporre in his latest column on RealMoney, our premium site for investors. "The bearish view is that this is the start of topping action that is going to lead to some poor action very soon."
Fourth-quarter productivity in the U.S. was held at 1.3% growth, according to the Bureau of Labor Statistics, though manufacturing productivity recorded a stronger increase than previously estimated. Unit labor costs rose by 1.7%, as previously reported.
Snap (SNAP) rebounded on Wednesday from two days of losses. The dramatic drop in the stock's price over the past two days -- shares fell 12% on Monday and nearly 10% on Tuesday -- came after a 44% surge last Thursday from its initial offering price. Snap jumped 6.4% on Wednesday.
Caterpillar (CAT) fell 2.8% after a New York Times report of a leaked document alleged non-compliance with "U.S. tax law or U.S. financial reporting rules," leading to the raid of its offices last week. No charges have been filed, and it isn't clear whether investigators agree with the findings or intend to act on them, according to the Times.
The report, which hasn't been made public or made available to Caterpillar, outlines a company strategy for bringing home billions of dollars from offshore affiliates while avoiding federal income taxes on those earnings, the Times reported. A spokeswoman for Caterpillar, which makes heavy construction and mining equipment, told the Times the company hadn't been provided with a copy of the report and declined to comment further.
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