US close: Stocks drop amid sliding oil prices and geopolitical tensions

US stocks fell on Wednesday as geopolitical tensions, growing concerns about China and a slide in oil prices left investors jittery.

The Dow Jones Industrial Average ended down 1.5%, the Nasdaq fell 1.1% and the S&P 500 closed down 1.3%.

Worries in Asia escalated after North Korea said it had successfully carried out an underground hydrogen bomb test. The news came after a 5.1 magnitude tremor was detected close to the nuclear test site at Punggye-ri, which monitors said was unlikely to be natural.

Meanwhile, concerns about China's economic slowdown showed no signs of abating after services data missed expectations.

Caxin's China services purchasing managers index fell to 50.2 in December from 51.2 the previous month, although it was above the 50 level that separates expansion from contraction. The report followed weak manufacturing data on Monday.

Sentiment was also dented by news that the People's Bank of China set a weaker midpoint for the yuan, adding to concerns about the health of the world’s second-largest economy.

Oil prices tanked on Wednesday, meaning energy-related shares were among the biggest losers.

West Texas Intermediate crude plunged 5.5% to $33.98 per barrel, while Brent slid 5.9% to $34.29, having hit lows not seen since 2004.

“I think this is a knock-on effect from the likelihood that the geopolitical tensions between Saudi Arabia and Iran have put an end to hopes on a deal on OPEC oil production,” said James Hughes, senior market analyst at GKFX.

“If you then add this to the fact that we have had relentless bad news out of china, including last night’s currency slip then the snowball effect is in full swing. These issues have pushed Nymex crude lower and due to the near non-existent spread between Brent and Nymex now means that Brent gets hit just as hard an breaks key levels at the same time. The events in North Korea have only added to further downward pressure, with the words nuclear explosion and markets never mixing too well together.”

Market participants also had a raft of US data to sink their teeth into.

According to private consultancy ADP, US employers added 257,000 jobs in December compared with a downwardly-revised tally of 211,000 jobs in October and expectations for a 200,000 gain. The report came ahead of the official monthly non-farm payrolls figures on Friday.

Markit's US PMI was revised higher to 54.3 in December from 53.7, beating forecasts for a reading of 54.

Mortgage applications in the US fell 11.6% in the week to 1 January, according to the Mortgage Bankers' Association.

Meanwhile, the Commerce Department revealed that goods manufactured in US factories dropped by 0.2% in November, while the Institute for Supply Management’s services index slipped 0.6 points to 55.3 last month compared with expectations for a reading of 56.3.

As well as the data, investors mulled over the minutes from the latest Federal Reserve meeting, which showed that for some members, the decision to hike interest rates for the first time in nearly a decade was a "close call”.

Comments from Fed vice chairman Stanley Fischer were also in focus, after he told CNBC on Wednesday that the market's expectations that the central bank will only raise interest rates twice in 2016 are too low.

The Fed sees four rate hikes this year but Fischer said this was more "in the ballpark", adding that it will depend on economic developments. "We don't know enough now to know how many (rate hikes) there will be," he said.

In corporate news, Apple was on the back foot after reports late on Tuesday that it plans to scale back production of iPhones, partly reflecting recently lower than expected sales.

Pioneer Natural Resources also fell after it announced a 10.5m share offering.

Chipotle Mexican Grill was under pressure again after it received a federal grand jury subpoena as the government investigates the norovirus outbreak at one of its California restaurants.

In addition, the company announced that sales at restaurants open at least one year dropped 30% in December after E. coli and norovirus outbreaks.

Shares in AutoNation plunged after the car retailer said it had to offer large discounts in December, and that it will report a smaller profit per vehicle in the fourth quarter.

Netflix bucked the trend, however, surging after announcing the launch of its platform in 130 new countries.

In currencies, the dollar rose 0.3% against the pound, but fell 0.3% and 0.5% versus the euro and the yen respectively.

S&P 500 - Risers

Netflix Inc. (NFLX) $117.69 +9.32%

Time Warner Inc. (TWX) $68.70 +4.85%

Reynolds American Inc. (RAI) $47.75 +2.53%

Hasbro Inc (HAS) $69.82 +2.41%

Regeneron Pharmaceuticals Inc. (REGN) $519.46 +2.06%

Equinix, Inc. (EQIX) $309.13 +1.89%

American Airlines Group (AAL) $41.23 +1.75%

Signet Jewelers Ltd (SIG) $127.24 +1.32%

Waste Management Inc. (WM) $53.30 +1.23%

Dr Pepper Snapple Group Inc. (DPS) $94.49 +1.20%

S&P 500 - Fallers

Williams Companies Inc. (WMB) $22.98 -12.72%

Southwestern Energy Co. (SWN) $6.68 -12.61%

Marathon Oil Corp. (MRO) $11.27 -11.68%

Apache Corp. (APA) $38.53 -11.49%

CONSOL Energy Inc. (CNX) $7.57 -11.25%

Murphy Oil Corp. (MUR) $20.12 -10.93%

AutoNation Inc. (AN) $50.86 -10.36%

Anadarko Petroleum Corp. (APC) $43.82 -9.69%

Ensco Plc. (ESV) $13.50 -9.34%

Diamond Offshore Drilling Inc. (DO) $18.99 -8.73%

Dow Jones I.A - Risers

Wal-Mart Stores Inc. (WMT) $63.62 +1.11%

Dow Jones I.A - Fallers

Chevron Corp. (CVX) $86.17 -3.84%

American Express Co. (AXP) $64.41 -3.22%

United Technologies Corp. (UTX) $93.20 -2.63%

Goldman Sachs Group Inc. (GS) $170.00 -2.35%

Intel Corp. (INTC) $33.07 -2.25%

Verizon Communications Inc. (VZ) $45.53 -2.09%

3M Co. (MMM) $144.50 -2.01%

Apple Inc. (AAPL) $100.70 -1.96%

Microsoft Corp. (MSFT) $54.05 -1.82%

Pfizer Inc. (PFE) $31.64 -1.68%

Nasdaq 100 - Risers

Netflix Inc. (NFLX) $117.69 +9.32%

Regeneron Pharmaceuticals Inc. (REGN) $519.46 +2.06%

American Airlines Group (AAL) $41.23 +1.75%

eBay Inc. (EBAY) $26.41 +1.11%

Gilead Sciences Inc. (GILD) $100.31 +1.06%

Dollar Tree Inc (DLTR) $80.56 +0.73%

Citrix Systems Inc. (CTXS) $73.99 +0.60%

Twenty-First Century Fox Inc Class A (FOXA) $26.72 +0.49%

Keurig Green Mountain Inc (GMCR) $90.26 +0.40%

Intuit Inc. (INTU) $96.33 +0.40%

Nasdaq 100 - Fallers

Lam Research Corp. (LRCX) $73.56 -5.87%

Skyworks Solutions Inc. (SWKS) $69.15 -5.65%

Wynn Resorts Ltd. (WYNN) $66.44 -5.18%

Vimpelcom Ltd Ads (VIP) $3.24 -4.99%

Seagate Technology Plc (STX) $34.75 -4.35%

Analog Devices Inc. (ADI) $51.73 -4.27%

Nvidia Corp. (NVDA) $31.53 -4.13%

Applied Materials Inc. (AMAT) $17.73 -4.11%

Bed Bath & Beyond Inc. (BBBY) $47.03 -4.10%

Micron Technology Inc. (MU) $14.22 -4.08%