US close: Stocks retreat as oil weighs, payroll data inconclusive

US stock indices fell on Wednesday to complete the month of August just below flat, with equities tracking oil prices lower as private payrolls data was stronger than expected but did not give a strong indication of the more important non-farm payrolls report at the end of the week.

The Dow Jones Industrial Average shed 0.29% to 18,400.88 points over the session and dropped 0.2%, the S&P 500 fell 0.24% to 2,170.95 and was modestly down 0.1% since July.

The Nasdaq Composite slipped 0.24% to 5,213.22 points but picked up 1% over the month of August.

As stocks searched for direction, there was a typically inconclusive reading from the comments of two Federal Open Market Committee members speaking on Wednesday, as Boston Fed President Eric Rosengren, a voting member, said at an event in China that the rate setting committee was close to achieving its employment and inflation target, hinting that policy tightening is on the horizon.

In contrast, Chicago Fed President Charles Evans suggested at the same event that he was in no rush to tighten policy.

Crude oil made a decisive move lower as the dollar weighed and US inventories data was worse than expected, with front-month West Texas Intermediate down 3.3% to $44.80 per barrel and Brent 2.8% to $47.04 per barrel.

The Energy Information Administration said crude inventories increased by 2.3m barrels last week to 525.9m, more than the forecast for a 1.3m gain and the fifth rise in six weeks.

Employment data in focus

Perhaps even more eyes were on the ADP measure of US private payrolls, which showed employers added 177,000 jobs in August, more than the 175,000 expected by analysts but lower than July's revised figure of 194,000.

The report has added importance as it comes ahead of the US Labor Department’s non-farm payrolls (NFP) report on Friday, which will be closely scrutinised after Federal Reserve chair Janet Yellen said the next interest rate hike depends on the strength of incoming data.

The ADP data, said analyst Connor Campbell at Spreadex, "failed to provide investors with much guidance" for either the NFP or the likely timeline of a Fed rate hike, not least because .

As shown by the upward revision of last month's data, it is difficult for investors to confidently use the ADP figure as an accurate gauge for the actual non-farm jobs report, he added, noting that it habitually fails to accurately pre-empt the kind of swings seen in the NFP.

Based on the ADP report, Capital Economics and Pantheon Macroeconomics saw little reason to change their NFP forecasts.

Some economists were also taking in the Conference Board's Help Wanted Online data, which showed online advertised vacancies increased 1,900 to 4,816,100 in August, so little changed following July's increase of 156,800.

A final indicator before Friday's big reveal will be Thursday's Jobs Report released by the National Federation of Independent Business (NFIB).

More data?

Meanwhile, US pending home sales rose more than expected in July, but June’s figure was revised down, according to data from the National Association of Realtors (NAR).

The NAR’s monthly index increased 1.3% to 111.3 in July from a downwardly-revised 109.9 in June, beating expectations for a 0.7% jump. The index is now at its second-highest level this year after April’s 115.0.

Separately, data showed economic activity in the Chicago area deteriorated more than expected in August.

The Chicago Purchasing Managers’ index fell to 51.5 from 55.8 in July, led by a large setback in order backlogs and a deceleration in new orders. Economists had been expecting a smaller decline to 54.0.

On the company front, Palo Alto Networks shares fell after the cybersecurity firm late Tuesday issued a downbeat outlook on the current quarter.

Reports emerged that the US Department of Justice (DoJ) has filed a lawsuit contesting Deere & Co's planned acquisition of a line of high-tech farming equipment from Monsanto. It said the deal, if it went ahead, would have the result of suppressing rivalry for technology that allowed farmers to plant crops at a faster rate, Dow Jones Business News reported.

AeroVironment slumped after the drone maker reported a 23% drop in quarterly revenue.

H&R Block was the biggest faller on the S&P as it posted quarterly results that missed analysts’ estimates.

Coca-Cola was higher as reports emerged that one of its plants in France was under investigation after huge haul of cocaine was found hidden in a container.

Dow Jones - Risers

Intel Corp. (INTC) $35.89 0.53%
Coca-Cola Co. (KO) $43.43 0.44%
McDonald's Corp. (MCD) $115.66 0.26%
Travelers Company Inc. (TRV) $118.72 0.20%
American Express Co. (AXP) $65.58 0.20%
Wal-Mart Stores Inc. (WMT) $71.44 0.18%
Merck & Co. Inc. (MRK) $62.79 0.13%
Verizon Communications Inc. (VZ) $52.33 0.11%
Apple Inc. (AAPL) $106.10 0.09%
Goldman Sachs Group Inc. (GS) $169.46 0.05%