U.S. equities finished lower on Wednesday amid renewed pressure on crude oil. There were no major directional drivers in play as investors await Friday’s big payrolls report — which will be closely examined for clues on the odds of a September Federal Reserve interest rate hike.
In the end, the Dow Jones Industrial Average lost 0.3%, the S&P 500 Index lost 0.2%, the Nasdaq Composite lost 0.2% and the Russell 2000 lost 0.5%. Treasury bonds were little changed, the dollar was mixed, gold lost 0.4% and crude oil fell 3.6% on another round of poor inventory data.
The EIA reported crude stockpiles increased by 2.3 million barrels last week, ahead of the consensus for the 1.5 million gain. Gasoline stockpiled increased by nearly 700,000 barrels, behind the consensus estimate for a 1.3 million barrel draw.
Other factors weighing on an oil increase are recent renewed strength in the U.S. dollar and an aggressive reduction of speculative short position in the futures market (last week featured the largest position reversal since 2006).
No surprise then that energy stocks led the decliners with a 1.4% loss. Defensive utility stocks shrugged off the weakness, rising 0.3%. On the economic front, the private ADP payrolls report increased 177,000 in August vs. a 194,000 gain in July, beating the 175,000 estimate.
Fed speakers were out as well, with Boston Fed President Rosengren saying policymakers were near their goals on employment and inflation and cited elevated commercial real estate valuations as a possible financial stability concern of keeping interest rates too low for too long. Chicago Fed President Evans, a dove, expressed concerns about secular stagnation risks.
Overall, the result for August was a small 0.2% decline for the Dow in August but a 1.6% gain for the Russell 2000. That was enough for the weakest month since January.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
