Crude prices plunged
more than 5 percent on Wednesday on a spike in U.S. oil stockpiles, while the
dollar gained on increased expectations the Federal Reserve will raise U.S.
interest rates next week after a robust report on private sector jobs.
The surge in crude
inventories to a record high slammed energy stocks, leading much of Wall Street
lower, and stoked concerns a global oil glut may persist even as the
Organization of the Petroleum Exporting Countries tries to prop up prices with
output curbs.
U.S. energy stocks
.SPNY slumped 2.5 percent in their biggest decline since mid-September.
More crude selling
could be triggered if oil prices break below support levels after trading in a
tight range this year, analysts said. Rising production also is hurting prices.
"The other thing
unnerving the market is rapid growth in U.S. crude production," said
Andrew Lebow, a senior partner at Commodity Research Group in Darien,
Connecticut.
The U.S. Energy
Information Administration reported crude stocks rose by 8.21 million barrels,
above a forecast 1.9 million. [API/S]
Brent crude LCOc1, the
international benchmark, settled down $2.81 at $53.11 a barrel. U.S. crude CLc1
fell $2.86 to settle at $50.28.
The dollar gained after
U.S. hiring in the private sector surged in February, underscoring the
economy's strength and adding to expectations the Fed will raise rates when
policy-setters meet on March 15.
The ADP National
Employment Report showed private payrolls grew by 298,000 jobs last month, well
above economists' expectations for a gain of 190,000. January's private
payrolls gains were revised up to 261,000 from 246,000.
Traders now see an 88.6
percent implied chance the Fed will raise rates by 25 basis points at its
meeting, up from 81.9 percent on Tuesday, according to the CME Group's FedWatch
tool.
The likelihood the Fed
will raise rates has not unnerved investors who, unlike during the "taper
tantrum" of 2013, now perceive the U.S. economy as strong enough to
withstand a rate hike and welcome a more normalized monetary policy.
"Even if the Fed
raises rates next week, it would be to 75 basis points which is historically
very low and is still considered very easy money," said Adam Sarhan, chief
executive of 50 Park Investments in Orlando, Florida.
The ADP report
initially buoyed Wall Street as financial and industrial stocks rose, but the
surge in oil stockpiles offset enthusiasm over the jobs data.
The Dow Jones
Industrial Average .DJI closed down 69.03 points, or 0.33 percent, at
20,855.73. The S&P 500 .SPX lost 5.41 points, or 0.23 percent, to 2,362.98
and the Nasdaq Composite .IXIC added 3.62 points, or 0.06 percent, to 5,837.55.
In Europe, the
pan-regional STOXX 600 index closed up 0.13 percent after declining the four
previous sessions.
MSCI's all-country
world stock index .MIWD00000PUS was off 0.3 percent, pulled lower by energy
stocks.
The euro fell to a
five-day low after the payrolls data and ahead of a meeting of the European
Central Bank on Thursday.
Traders and investors
expect the ECB to maintain its loose monetary policy despite rising
inflationary pressures.
The dollar has rallied
by about 2.5 percent against a basket of major trading currencies over the past
five weeks.
The dollar index .DXY
gained 0.28 percent at 102.100. The dollar rose 0.33 percent against the
Japanese currency JPY= to 114.34 yen and edged up 0.25 percent to $1.0539
versus the euro EUR=.
The strong gain in
private-sector jobs pushed benchmark U.S. Treasury yields to their highest
since December.
The 10-year U.S.
Treasury note yield US10YT=RR hit 2.583 percent, a level last seen on Dec. 20,
before easing to 2.5560 percent, up almost 5 basis points from late on Tuesday,
according to Thomson Reuters data.
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