Stocks Close Modestly Lower But Well Off Worst Levels - U.S. Commentary

(RTTNews) - After coming under pressure in morning trading on Wednesday, stocks regained some ground in the afternoon but remained stuck in the red. With the lower close on the day, the major averages added to the losses posted in the previous session.

The major averages finished the day in negative territory but well off their worst levels. The Dow fell 53.42 points or 0.3 percent to 18,400.88, the Nasdaq edged down 9.77 points or 0.2 percent to 5,213.22 and the S&P 500 dipped 5.17 points or 0.2 percent to 2,170.95.

Interest rate uncertainty continued to weigh on the markets ahead of the release of the Labor Department's closely watched monthly jobs report on Friday.

The strength of the jobs data is likely to have a significant impact on expectations regarding whether the Federal Reserve will raise interest rates at its next meeting.

Fed Chair Janet Yellen said last Friday she believes the case for raising rates has strengthened in recent months, although she stressed that policy decisions always depend on the degree to which incoming data continues to confirm the central bank's outlook.

Payroll processor ADP released a report before the start of trading showing that private sector employment increased roughly in line with economist estimates in the month of August.

ADP said the private sector added 177,000 jobs in August following an upwardly revised increase of 194,000 jobs in July. Economists had expected employment to climb by about 175,000 jobs.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "If the ADP turns out to be off the mark and non-farm payrolls increase by 250,000 or more, as they did in both June and July, then a September rate hike would become a real possibility."

"It is more likely that payrolls will come in below 200,000, however, which would probably persuade the Fed to hold off on the next rate hike until December," he added.

The Labor Department report is expected to show an increase of about 175,000 jobs in August following the jump of 255,000 jobs in July.

The weakness on Wall Street also came amid a steep drop by the price of crude oil, with crude for October delivery tumbling $1.65 to $44.70 a barrel.

The price of crude oil came under pressure following the release of a report from the Energy Information Administration showing a much bigger than expected weekly increase in crude oil inventories.

Sector News

Extending a recent downward trend, gold stocks saw significant weakness on the day, with the NYSE Arca Gold Bugs Index slumping by 2.2 percent. With the drop, the index fell to its lowest closing level in over two months.

A continued decrease by the price of gold contributed to the weakness in the sector, as gold for December delivery fell $5.10 to $1,311.40 an ounce.

Energy stocks also came under considerable selling pressure as the day progressed, moving notably lower along with the price of crude oil.

Reflecting the weakness in the energy sector, the NYSE Arca Oil & Gas Index slid by 1.7 percent, the Philadelphia Oil Service Index dropped by 1.6 percent and the NYSE Arca Natural Gas Index fell by 1.5 percent.

Electronic storage, steel, and networking stocks also saw significant weakness, while most of the other major sectors showed more modest moves to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mixed once again following the trading day on Wednesday. Japan's Nikkei 225 Index surged up by 1 percent, while Hong Kong's Hang Seng Index edged down by 0.2 percent.

Meanwhile, the major European markets all moved to the downside over the course of the session. While the French CAC 40 Index fell by 0.4 percent, the U.K.'s FTSE 100 Index and the German DAX Index both dropped by 0.6 percent.

In the bond market, treasuries close nearly flat for the second consecutive day. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 1.568 percent.

Looking Ahead

Reports on jobless claims, labor productivity, manufacturing activity and construction spending may attract attention on Thursday, although trading activity may be subdued as the jobs report looms.