US open: Stocks drop on disappointing services data

US stocks were declined on Wednesday as a better-than-expected private payrolls report was offset by disappointing services data.

The Dow Jones Industrial Average fell 0.60%, the Nasdaq dipped 1.35% and the S&P 500 slumped 1.00% at 1528 GMT.

ADP’s labour market report showed US employers added 205,000 jobs in January, beating forecasts of 195,000 and following 267,000 in December. The report comes ahead of the non-farm payrolls on Friday, which the Federal Reserve will be closely monitoring as it decides when to next raise interest rates.

“While we place limited weight on the ADP jobs numbers, this morning’s release is supportive of our outlook for 225,000 in non-farm payroll gains in Friday’s official employment report,” said Barclays Research analysts.

Markit’s final reading of the US services purchasing managers’ index was revised to 53.2 in January from a previous estimate of 53.7, down from 54.3 in December. A reading above 50 signals expansion while a level below that indicates a contraction in sector activity growth.

ISM’s non-manufacturing composite also fell short of estimates. The index dropped to 53.5 in January from 55.8 in December, compared to forecasts of 55.2.

Meanwhile, oil prices were on the rise ahead of US supply data, with West Texas Intermediate up 2.1% to $30.54 per barrel and Brent crude up 2.5% to $33.57 per barrel at 1515 GMT.

Official weekly supply data will be released by the Energy Information Administration at 1530 GMT, with analyst predicting an increase of 3.5 million barrels.

The American Petroleum Institute said late Tuesday that the US crude stockpiles rose 3.8 million barrels last week, less than gains in the previous week.

On the company front, shares in Syngenta gained after the Swiss pesticide and seed firm agreed to a $43bn takeover by China National Chemical Corp.

Yahoo declined on news that the company plans to take drastic measures to shore up cash including a 15% cut of its workforce and a $1bn asset disposal programme.

The dollar fell 0.97% against the pound, dropped 0.96% against the euro and slid 1.42% against the yen.