Stocks fell on Wednesday as the recent rally in equities eased and investors digested falling oil prices, as well as quarterly results from retail firms.
“It looks like a normal, healthy pullback,” said Adam Sarhan, CEO at Sarhan Capital. “Even under the surface, … we see orderly selling.”
“At this point in time, investors are looking for a reason to sell, and they can’t find it,” he said. “As long as these pullbacks are short, the bulls remain in control.”
The benchmark S&P 500 traded about 9 point lower, as energy lagged. The Dow Jones industrial average held about 60 points lower, with ExxonMobil contributing the most losses. The Nasdaq composite underperformed, trading about 0.5 percent lower.
“I think we’ll be relatively flat for a while for two reasons. First, Earnings season is mostly over, and that created positive support for stocks. Second, economic news … is expected to be mixed,” said Kate Warne, investment strategist at Edward Jones. “Overall, we’re looking at a flat market for a while as investors reassess [the recent rally].”
Warne also said this would be a good time for investors to “put money to work.”
Oil futures seesawed Wednesday, with U.S. crude 2.48 percent lower, at $41.71 lower after the Energy Information Administration’s weekly inventories data release. The data showed U.S. commercial crude inventories rose by 1.1 million barrels to a total of 523.6 million last week. Analysts expected the EIA to cite a drawdown of about 1 million barrels each in both domestic crude and gasoline inventories.
David Kelly, chief global strategist at JPMorgan Funds. said a build in inventories may pressure oil prices, but the knock-on effect on equities should not be small. “The world is awash in oil, but it’s not because the economy is faltering,” he said.
Before the bell, Michael Kors posted quarterly results that beat expectations on both lines, but the stock was down 2.6 percent. Meanwhile, Ralph Lauren shares popped more than 9 percent after its earnings came in sharply above expectations.
“The one think that we’ve found with the consumer … is people have really over-estimated the impact of lower energy prices for the consumer,” said Nick Raich, CEO of The Earnings Scout.
Kohl’s, Macy’s and Nordstrom are scheduled to post results on Thursday.
U.S. stocks have traded in a tight range recently, while the CBOE Volatility index (VIX), widely considered the best gauge of fear in the market, has held near one-year lows. On Wednesday, the Vix traded 7 percent higher, near 12.5.
“Barring a shock, I think the market is going to be pretty quiet over the next few weeks,” JPMorgan’s Kelly said.
“Stretched valuations have made it difficult for value managers to put money to work. The economic data remains mixed as evidenced by yesterday’s lousy Productivity report,” Jeremy Klein, chief market strategist at FBN Securities, said in a Wednesday note to clients.
That said, the S&P and the Nasdaq notched all-time intraday highs Tuesday.
“The bulls have had their way with the bears after the broader indices bottomed in the immediate aftermath of United Kingdom’s referendum pertaining to its status within the European Union. Although a significant amount of long term uncertainty surrounds Brexit, the fears associated with the shocking result on June 23 seems comical in hindsight,” Klein said.
On the data front, the Job Openings and Labor Turnover Summary (JOLTS) report showed an increase to 5.624 million job openings in June.
U.S. Treasurys advanced, with the two-year note yield falling to about 0.7 percent, while the benchmark 10-year yield held around 1.50 percent. The Treasury Department sold $23 billion worth of 10-year notes at a high yield of 1.503. The auction saw weak demand.
The dollar fell against a basket of currencies, with the euro rising to $1.118 and the yen falling to 101.28.
Overseas, European equities traded slightly lower, with the Stoxx 600 index slipping 0.2 percent. In Asia, the Shanghai composite fell 0.23 percent, while the Nikkei 2225 dropped 0.18 percent.
The Dow Jones industrial average traded 60 points lower, or 0.33 percent, at 18,472, with ExxonMobil leading decliners and Walt Disney the top advancer.
The S&P 500 fell 9 point, or 0.43 percent, to 2,172, with energy leading seven sectors lower and consumer staples leading advancers.
The Nasdaq composite fell 27 points, or 0.53 percent, to trade at 5,197.
About nine stocks declined for every five advancers at the New York Stock Exchange, with an exchange volume of 460 million and a composite volume of 2.245 billion in afternoon trade.
Gold futures for December delivery settled $5.20 higher at $1,351.90 per ounce.