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The S&P 500 and the Dow Jones Industrial Average dipped on Wednesday as energy stocks suffered their worst drop in nearly six months.
The energy sector, slumped 2.5 per cent for its biggest decline since mid-September. Oil prices tumbled more than 5 per cent in the wake of a much stronger-than-expected rise in US inventories.
“Good news had certainly been out there in terms of production cuts,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.
“Now you see, especially on the US side, inventory builds and shale producers making some good money at these levels so production comes back on line.”
Also moving lower were interest rate-sensitive real estate stocks, off 1.5 per cent, after the ADP National Employment report showed the US private sector added 298,000 jobs last month, well above expectations for a 190,000 increase.
The robust data set the stage for Friday's non-farm payrolls report, which includes private and public sector jobs and is seen as a barometer of the US economy. With a small chance of a weak payrolls report, the US Federal Reserve is more likely to raise rates at its meeting next week.
Traders now price in an 85.2-per cent chance of a rate increase, according to Thomson Reuters data, up from 30 per cent at the start of last week following hawkish comments from a string of Federal Reserve officials, including Chair Janet Yellen.
Wall Street's main indexes remain close to all-time highs, driven by anticipation of pro-growth policies under President Donald Trump. However, as details remain scarce on his plans, gains have moderated and concerns about stock valuations are more pronounced.
The S&P 500 is trading at about 18 times forward earnings estimates against the long-term average of about 15 times, according to Thomson Reuters data.
The Dow Jones Industrial Average fell 69.17 points, or 0.33 per cent, to 20,855.59, the S&P 500 lost 5.41 points, or 0.23 per cent, to 2,362.98 and the Nasdaq Composite added 3.62 points, or 0.06 per cent, to 5,837.55.
Caterpillar fell 2.8 per cent after the New York Times said it reviewed a report commissioned by the US government that accused the heavy equipment maker of carrying out tax and accounting fraud.
H&R Block shares surged nearly 15 per cent for their best day in over eight years, after the tax preparation company posted its quarterly results.
Declining issues outnumbered advancing ones on the NYSE by a 2.74-to-1 ratio; on Nasdaq, a 1.45-to-1 ratio favoUred decliners.
The S&P 500 posted 15 new 52-week highs and 13 new lows; the Nasdaq Composite recorded 65 new highs and 47 new lows.
About 7.07 billion shares changed hands in US exchanges, slightly above the 6.94 billion daily average over the last 20 sessions.
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