A selloff in oil sent stocks slumping, with the S&P 500 index erasing its monthly gain, as traders awaited jobs data to assess the outlook for interest rates in the world’s largest economy.
Energy producers dragged down equities as crude fell below $45 a barrel after a report showed U.S. stockpiles climbed by more than projected. The benchmark gauge for American shares halted its longest monthly winning streak in two years, and failed to budge more than 1 percent in either direction for a 38th day. Meanwhile, the dollar held onto its August gains amid speculation on a rate hike this year. Brazil’s real rose as Dilma Rousseff was impeached, paving the way for a shift in economic policy after the country plunged into its deepest recession in a century.
“Commodities trade a lot on feel, and there’s probably a little bit more drama today than needed,” said John Stoltzfus, chief market strategist at Oppenheimer & Co. in New York. “The markets are all trimming lower basically ahead of the non-farm payroll numbers. Just waiting to see that.”
Stocks, bonds and the dollar have wobbled between gains and losses as investors sharpen their focus toward August’s employment data due Friday, which may influence a Federal Reserve move in three weeks. A private report by the ADP Research Institute signaled Wednesday that the labor market continued to see steady growth. While policy makers have said they will boost borrowing costs gradually, Chair Janet Yellen’s bullish economic assessment last week spurred bets a move could come as soon as next month.
U.S. employers added 180,000 jobs in August, according to the median forecast in a Bloomberg survey of economists. While that’s down from a 255,000 increase in July, the monthly labor-force number has exceeded expectations in the past two readings. The prospect of an increase in U.S. rates as early as next month climbed to 36 percent, from 18 percent at the start of August, according to fed fund futures data compiled by Bloomberg. The chance of a hike by December was 61 percent.
The S&P 500 fell 0.2 percent at 4 p.m. in New York. After rallying for five straight months and reaching a record on Aug. 15, the gauge has failed to maintain its momentum amid mixed economic reports and speculation over the timing of the next Fed move. Meanwhile, the CBOE Volatility index has rallied 13 percent in August.
Energy companies trimmed their August advance, while utility stocks posted the biggest monthly decline in more than a year, and phone companies had their worst since 2014. Technology and financial shares both rose for a second month.
European stocks fell as declines in commodity and energy producers outweighed the best month for banks in more than a year. Commerzbank and Deutsche Bank rallied after Manager Magazin reported the latter considered a potential merger. Greek lenders pushed the ASE Index to the best performance among western-European markets after Piraeus Bank nd Alpha Bank released earnings.
The MSCI Emerging Markets Index trimmed its third consecutive monthly gain as declining commodity prices weighed on benchmark gauges in exporting nations from Russia to South Africa and Brazil.
West Texas Intermediate for October delivery dropped 3.6 percent to $44.70 a barrel on the New York Mercantile Exchange. Oil still posted its biggest monthly advance since April.
Crude inventories rose 2.28 million barrels, according to the Energy Information Administration. A 1.3 million-barrel increase was projected by analysts surveyed by Bloomberg before the report. Crude imports increased 3.2 percent to 8.92 million last week, the highest since September 2012, the report showed.
“This is a bearish report and you see the market reacting,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $133 billion of assets. “OPEC can’t continue to jawbone the market with these fundamentals. They will have to do something at this upcoming meeting to keep it together.
Oil entered a bull market Aug. 18, less than three weeks after tumbling into a bear market, as prices surged partly on speculation that talks in Algeria next month among members of the Organization of Petroleum Exporting Countries may result in action to stabilize the market. A deal to freeze output was proposed in February but a meeting in April ended with no final accord.
The Bloomberg Dollar Spot index, which tracks the currency against 10 peers, posted the first monthly gain since May. The U.S. currency fell 0.1 percent to $1.1156 per euro, and added 0.5 percent to 103.43 yen.
The dollar has rallied since mid-August as the likelihood for a Fed interest-rate hike by December has moved up. Vice Chairman Stanley Fischer said last week a central-bank increase is possible and added Tuesday the Fed would base decisions at its Sept. 21 meeting on economic data, putting added focus on the U.S. August payrolls data.
The dollar’s recent strength was due to “the Fischer comments made at the end of last week, which has spurred the belief that the September meeting could be very much alive,” said Daragh Maher, New-York-based head of U.S. currency strategy at HSBC Holdings. “The market took that as a validation to continue this mini-rally in the dollar.”
The real extende the world’s best currency rally in 2016, after Senators found Rousseff guilty of bypassing Congress to finance government spending, paving the way for her vice president Michel Temer to serve out the term until general elections in 2018.
South Africa’s rand led declines among major peers after the country’s biggest private fixed-income money manager said it will stop lending money to six of the largest state-run companies.
The 10-year Treasury yield was little changed at 1.57 percent, according to Bloomberg Bond Trader data. Option measures of futures swings have declined. A CBOE index that tracks Treasury volatility is down 24 percent from a June peak just days after Britain voted to quit the European Union.
“Typically, liquidity declines pretty regularly in August, reflecting vacations schedules more than anything else,” said Joshua Younger, an interest-rate derivative strategist at JPMorgan in New York. “This year, we have not seen that usual pattern. This has kept volatility in check.”
With assistance from Toshiro Hasegawa, Emma O’Brien, Kevin Buckland, Lilian Karunungan, Narayanan Somasundaram, Alan Soughley, David Goodman, Eddie van der Walt, Justin Villamil, James Regan, Kelly Gilblom, Stephen Kirkland, Rebecca Spalding, Anooja Debnath, Mark Shenk and Joseph Ciolli