Market Wrap: Stocks Dipped - But You'll Like the Reason Why

a work over rig servicing an oil pump in the texas panhandle spring 2007
Jim Parkin/Alamy
NEW YORK -- A slump in oil prices weighed on the stock market Thursday, pushing the Standard & Poor's 500 (^GPSC) index to its third straight loss.

Stocks had started the day higher after the European Central Bank surprised investors by announcing that it had cut its benchmark interest rate to a record low and planned to purchase asset-backed securities in an effort to stimulate the region's ailing economy. Investors were also cheered by some encouraging reports on the U.S. economy.

The gains didn't hold though and the market fell back during afternoon trading, as the falling price of oil pushed energy stocks lower. Oil closed the day down 1.1 percent at $94.45 a barrel, dropping after government data showed that U.S. supplies fell less than expected last week. Traders may also have been reluctant to place big bets ahead of Friday's closely watched government jobs report.

Stocks have made a sluggish start to September, historically the worst month for the market, after surging in August. The S&P 500 gained 3.8 percent last month, climbing to a record high as it logged its best performance since February.

"The market did respond to the ECB news this morning and certainly to the good economic news, but there are definite signs that this market is stretched a bit," said Peter Cardillo, chief market economist at Rockwell Global Capital.

The S&P 500 index fell three points, or 0.2 percent, to 1,997.65. The index closed below the 2,000 points for the first time since it breached that level Aug. 29. The Dow Jones industrial average (^DJI) fell eight points, or 0.1 percent to 17,069.58 points. The Nasdaq composite (^IXIC) dropped 10.28 points, or 0.2 percent, to 4,562.29.

Stocks had climbed in early trading, following a move higher by major indexes in Europe, after the ECB's surprise announcement. Some analysts had been expecting the central bank to say it was preparing a new stimulus program, but most did not expect an announcement as early as this week.

The ECB said it had trimmed its benchmark interest rate to 0.05 percent from a previous record low of 0.15 percent. In a news conference, ECB President Mario Draghi also said the bank would also start purchases of private sector financial assets in October. The program aims to make credit cheaper, helping investment and growth at a time when the economy of the 18-country eurozone has stalled.

As well as boosting stocks, the announcement caused the euro to slump against the dollar, pushing it to its lowest level against the U.S. currency in more than a year. Europe's single currency, which has been in retreat over the past few weeks on expectations that the ECB may pursue further stimulus measures, fell 1.5 percent to $1.29 per euro.

There was also encouraging news for investors on the U.S. economy on Thursday.

U.S. services firms expanded in August at the fastest pace on record. The Institute for Supply Management said Thursday that its services index rose to 59.6 last month from 58.7 in July. The August figure is the highest recorded since the measure was introduced in January 2008.

Hiring is also picking up and U.S. businesses added jobs at a healthy pace in August, according to a private survey, the fifth straight month of solid gains. On Friday, the government will issue the August jobs report. The forecast is that U.S. employers added 220,000 jobs and that the unemployment rate dipped to 6.1 percent from 6.2 percent.

The early gains for stocks then faded in the afternoon as the energy stocks sagged, declining 1.3 percent, as the price of oil dropped.

Among other stocks making big moves, PVH (PVH) was the biggest gainer in the S&P 500.

The company, which owns of the Calvin Klein and Tommy Hilfiger brands, surged $11.25, or 9.6 percent, to $128.30, after reporting earnings that exceeded the expectations of Wall Street analysts.

Government bond prices fell. The yield on the 10-year Treasury note, which moves inversely to its price, climbed to 2.45 percent, from 2.40 percent late Wednesday.

In metals trading, gold closed down $3.80, or 0.3 percent, at $1,266.50 an ounce. Silver slipped 5.1 cents, or 0.3 percent, to $19.14 an ounce. Copper prices rose, climbing to 2.4 cents, or 0.8 percent, to $3.15 per pound.

In addition to oil, other energy prices fell. Heating oil dropped 3 cents to $2.836 a gallon and natural gas declined 2.8 cents to $3.819 per 1,000 cubic feet.

What to Watch Friday:
  • The Labor Department releases employment data for August at 8:30 a.m. Eastern time.

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9 Comments

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gts31bumbee

Why oh Why hasn't the price of fuel gone lower in proportion to the per barrel price ? These cheats never give the consumer anything ! Bring on solar, and wind-power and fuel cells and lets put Big Oil where it deserves to be; on the back burner, pun intended !

September 05 2014 at 12:29 PM Report abuse rate up rate down Reply
Robert Smith

wtf

September 05 2014 at 3:40 AM Report abuse rate up rate down Reply
Robert Smith

wtf

September 05 2014 at 3:40 AM Report abuse rate up rate down Reply
Robert Smith

wtf

September 05 2014 at 3:40 AM Report abuse rate up rate down Reply
cameltoes_david

I'm sure Bernie Madoff is wondering why he's in prison and and the Ponzi people in Wall Street are free.

September 04 2014 at 9:13 PM Report abuse +3 rate up rate down Reply
1 reply to cameltoes_david's comment
Iselin007

Others are wondering and wiping their brow right now. All those millions of jobs that went off had to have some help. The world is becoming too unstable for anyone to think a recovery is coming.

September 04 2014 at 9:35 PM Report abuse +1 rate up rate down Reply
1 reply to Iselin007's comment
gts31bumbee

But, but, Bush specifically promised new jobs for his tax cuts which lingered 10 years. It seems he and the elite GOP lied and pocketed most of the money and never kept this promise !
While we are at it, do recall that Romney had a plan that would create 11 million new jobs once he was elected !

September 05 2014 at 12:36 PM Report abuse rate up rate down
Iselin007

Politics has become a full time job of skirting one's duties and raising cash. The crooks are running away with everything but the kitchen sink while the voters are lied to. The new deal is now a joke as older people are fired before they can be fully vested in their 401 k plan. SSI is crumbling as older people find it harder to escape the job gaps as they are constantly pushed out of the work force. The new global trade isn't working because your reason for it was as crooked as your scheme to rid the workforce of people so you could pocket their share.

September 04 2014 at 9:11 PM Report abuse +1 rate up rate down Reply
Iselin007

All the excuses or reasons in the world either way have nothing with much of anything. The shift in wealth from the work force to the endless leeches in the financial cosmos can only go on so long before the people loose control and demand as the food workers are doing their share of the American Dream.

September 04 2014 at 8:53 PM Report abuse +2 rate up rate down Reply
HonknDodge

I don't like the reason. I make more money with the stock market then I would pay for a little higher price in gasoline.

September 04 2014 at 6:42 PM Report abuse -1 rate up rate down Reply
2 replies to HonknDodge's comment
cameltoes_david

So others should pay more at the pump in order for you to make money? BTW do you sell used cars?

September 04 2014 at 9:09 PM Report abuse +2 rate up rate down Reply
1 reply to cameltoes_david's comment
Iselin007

I just heard tonight on the news that electric and hybrid car sales were down. The Tesla model isn't produced for the average working stiff which is why it isn't suffering the same drop in sales.

September 04 2014 at 9:19 PM Report abuse rate up rate down
Iselin007

Your in luck gas prices won't stay down. The refineries were an issue in the past so they probably will be an issue in the future. A sudden change in gas prices downward now without the bidders pushing the price up sounds suspect.

September 04 2014 at 9:25 PM Report abuse +1 rate up rate down Reply