Stock markets worldwide were mostly lower on Wednesday as oil prices dipped below $40 a barrel, while the dollar moved higher after Federal Reserve Chair Janet Yellen voiced her support for an interest rate hike.
Major U.S. benchmarks moved lower amid declines in the energy sector. The Dow Jones Industrial Average shed 158.67 points, or 0.9%, to trade at 17,729.68. The S&P 500 fell 23.12 points, or 1.1%, to trade at 2,079.51, and the Nasdaq Composite declined 33.08 points, or 0.6%, to close Wednesday’s trading session at 5,123.22. The declines were led by the energy sector as oil prices tumbled 4.6% to trade at $39.94 a barrel, moving below $40 for the first time since late summer. Energy prices moved lower following the release of a report showing a large increase in U.S. supplies, adding to existing concerns over a global supply glut. Exxon Mobil (N:XOM) and Chevron (N:CVX), declining 2.9% and 2.4%, led the energy sector down and accounted for a large portion of Dow Jones’ loss. Energy-related shares are likely to remain unsteady until Friday’s meeting of the Organization of the Petroleum Exporting Countries (OPEC), which is expected to be one of the more combative meetings in organization’s history due to differences between members on production policies.
The U.S. dollar moved to multi-year highs after the release of upbeat employment data and comments from Federal Reserve Chair Janet Yellen, who stated her support for an interest rate hike. The dollar index, which comapres the U.S. dollar to a basket of major peers, rose to a twelve-year high at 100.51 and has since retreated to 100.13. Yellen noted that raising borrowing costs would be a testament to the U.S. economy’s strength and recovery. The long-expected interest rate hike may be introduced in the Federal Reserve’s December 15 Federal Open Market Committee (FOMC). The dollar was further bolstered by the release of a strong employment survey from ADP ahead of Friday’s official nonfarm payrolls report. The survey beat its 190K jobs added to the market forecast, coming in at 217K. However, the report relies on a limited sample size, causing large error margins in a number of occasions when compared to official government data.
This week’s major economic data releases continue today with The European Central Bank’s interest rate decision, followed by U.S. non-manufacturing PMI. The week will conclude with the U.S. nonfarm payrolls employment report, which holds special significance due to the Federal Reserve’s statements regarding a data-dependent interest rate hike in December. Friday will also see OPEC members meet to discuss the highly contentious production policies.