Investing.com – After opening the session with losses, Wall Street followed oil’s turnaround into positive territory but was unable to hold gains amidst worries that recent economic data gives the Federal Reserve more reason to begin gradual rate hikes this year.
Oil prices spent most of Wednesday’s trading in the red after the American Petroleum Institute, an industry group, said that U.S. oil inventories rose by 9.9 million barrels in the week ended February 26, surprising market players who were expecting a gain of 2.5 million barrels.
Crude plunged even further after the U.S. Energy Information Administration said in its weekly report that crude oil inventories soared by a whopping 10.4 million barrels in the week ended February 26, almost triple the consensus estimate.
Nevertheless, black gold staged a quick recovery taking it to session highs above $35. Amidst severe volatility, at 16:33GMT or 11:33AM ET, gains moved off Wednesday’s high and crude oil futures for April delivery on the New York Mercantile Exchange advanced $0.21, or 0.61%, to trade at $34.61 a barrel, while Brent oil rose $0.18 or 0.49% to $37.01.
The recovery in oil pushed U.S. stocks briefly into positive territory, but they were unable to maintain their enthusiasm. At 16:37GMT or 11:37AM ET, the Dow 30 shed 7 points or 0.04%, while the S&P 500 slipped 2 points or 0.10% and the tech-heavy NASDAQ Composite lossed 13 points or 0.27%.
On the data front, a report from payroll processing firm ADP showed that non-farm private employment rose by a seasonally adjusted 214,000 last month, surpassing expectations for an increase of 190,000. There was a caveat in the fact that 208,000 of those contracts were creating in the services sector, but the number still adds another positive read to recent data that could force the Federal Reserve to start tightening monetary policy this year.
San Francisco Fed president John Williams showed a more hawkish stance in an interview with Financial Times. He told the British financial paper that he doesn’t understand warnings about an imminent U.S. recession as there are no signs of weakening domestic demand which is more than compensating for economic slack abroad. In line with the U.S. central bank’s current rhetoric, Williams repeated that Fed rate hikes would be gradual.
After the recent flow of positive economic indicators, traders raised bets for the Fed to hike rates this year. They now see a 38% chance for a June boost in borrowing costs, up from about 26% a week ago, according to Bloomberg data. The probability for a December hike increased to 64% from 42% last Wednesday.
In the remainder of the session, traders will keep an eye on the beige book which will show the state of the U.S. economy in the regions of the 12 Federal Reserve banks at 19:00GMT or 14:00ET.
In large stock movements, Monsanto (NYSE:MON) sank more than 6% after forecasting full-year earnings-per-share of $4.40-$5.10, compared to consensus estimate of $5.15.
Zynga Inc (NASDAQ:ZNGA) jumped almost 3% after appointing former Electronic Arts (NASDAQ:EA) exec Frank Gibeau as its new CEO, while its founder Mark Pincus became executive chairman.
Costco Wholesale (NASDAQ:COST) and American Eagle Outfitters (NYSE:AEO), among others, will report after the market close.