By Ellie Ismailidou and Wallace Witkowski, MarketWatch

Services data gains, trade deficit shrinks

U.S. stocks traded in the red Wednesday as weaker-than-expected private-sector jobs data and a slide in worker productivity eclipsed reports of strength in the services industry.

The S&P 500 fell 13 points, or 0.7%, to 2,049, led by a sharp drop in the energy and industrials sectors.

The Dow Jones Industrial Average declined 114 points, or 0.6%, to 17,637, weighed by a 2.6% decline in Caterpillar Inc.(CAT) and a 2.3% loss in Goldman Sachs Group Inc.(GS)

Meanwhile, the Nasdaq Composite was down 39 points, or 0.8%, at 4,724.

The moves come a day after stocks fell to their lowest level in three weeks on Tuesday (http://www.marketwatch.com/story/stock-futures-slide-as-fear-creeps-into-the-markets-2016-05-03), as weaker-than-expected manufacturing data in China and a cut of interest rates in Australia revived worries about an overseas economic slowdown.

On Wednesday, the ADP employment number for April (http://www.marketwatch.com/story/adp-reports-private-sector-job-gains-slowed-in-april-2016-05-04) came in at 156,000, well short of the 200,000 jobs expected, showing that private payroll gains slowed markedly in April. The report is seen as a precursor to the top-tier nonfarm-payrolls data out on Friday (http://www.marketwatch.com/story/if-the-economy-springs-back-jobs-and-auto-sales-will-lead-the-way-2016-05-01), which are closely watched as they are seen as playing a big part in determining the future path for Federal Reserve interest rates.

Meanwhile, the productivity of U.S. businesses and workers (http://www.marketwatch.com/story/us-productivity-drops-1-in-first-quarter-2016-05-04) fell by a 1% annual rate in the first quarter, marking the fourth decline in the past six quarters.

The strong ISM services index (http://www.marketwatch.com/story/ism-services-index-climbs-to-557-in-april-2016-05-04)had sparked some risk appetite, pushing the main benchmarks off session lows reached earlier, after a flurry of weaker-than-expected economic reports, including private-payrolls data, suggested the economy continues to grow at a slow pace.

On the bright side, the U.S. trade deficit shrank in March (http://www.marketwatch.com/story/us-trade-deficit-sinks-17-in-march-to-404-billion-2016-05-04) to its lowest level in more than a year, but the plunge still reflected a tough climate for American exporters and more caution on the part of consumers.

The flurry of data continued to "paint a picture that can be described as 'growth purgatory,'" said Michael Arone, chief investment strategist at State Street Global Advisors.

According to Arone, the U.S. economy is "stuck in low and slow gear" where data constantly miss expectations but they are not bad enough to indicate a recession is on the horizon.

Wednesday's lackluster data suggested that "the services sector continues to carry the weight of the U.S. economy, as it's less vulnerable to dollar volatility and soft global trade," said Peter Boockvar, chief market analyst at The Lindsey Group, in emailed comments.

Boockvar said "the discrepancy between ADP and this ISM survey makes Friday's payroll report more uncertain relative to expectations."

Meanwhile, investors were watching a slight dip in oil prices (http://www.marketwatch.com/story/oil-prices-fluctuate-ahead-of-weekly-supply-update-2016-05-04), which over the last two sessions have shed some 5% of the more than 60% gain since their lows earlier this year. On Wednesday, oil futures fell under pressure after a report by the U.S. Energy Information Administration showed larger-than-expected supply build.

A nascent rebound in the dollar (http://www.marketwatch.com/story/dollar-advances-for-second-day-against-key-rivals-2016-05-04)could also have implications for U.S. stocks, analysts said, as the dollar index has shed nearly 6% of its value year-to-date, which many analysts say has helped equities by making goods produced in the U.S. more competitive in global markets.

Fed speakers: Minneapolis Fed President Neel Kashkari, who isn't a voting member of the Fed's policy-setting committee this year, will speak in Rochester, Minn., at 5:30 p.m. Eastern.

Movers and shakers:Etsy Inc.(ETSY) shares rose 2.1%, after the online marketplace posted a surprise profit (http://www.marketwatch.com/story/etsy-rises-after-surprise-profit-from-services-sold-to-sellers-2016-05-03) in the first quarter thanks to strong revenue gains in services sold to the users who sell merchandise on its site.

Under Armour Inc.'s stock (UA) dropped 6.5%, after the athletic gear company announced another round of executive departures. Departing executives (http://www.marketwatch.com/story/tesla-stock-falls-on-reports-of-key-executives-leaving-2016-05-04) were also key in the decline 4% decline in shares of Tesla Motors Inc.(TSLA)

U.S.-listed shares of BHP Billiton(BHP.AU) and Vale SA(VALE5.BR) both slumped about 6%. The moves came after Brazilian federal prosecutors filed a civil lawsuit Tuesday over a catastrophic dam failure in November. Prosecutors are seeking up to 155 billion reals ($43.55 billion) (http://www.marketwatch.com/story/mining-firms-bhp-vale-face-44b-lawsuit-in-brazil-2016-05-03) for cleanup and remediation. The dam was run by Samarco Mineração, a joint venture between BHP and Brazilian miner Vale.

Priceline Group Inc.(PCLN) plunged 8.8% after the online travel-services company reported first-quarter results that beat expectations, but provided a second-quarter profit outlook that was well below analyst projections (http://www.marketwatch.com/story/pricelines-stock-tumbles-as-profit-outlook-falls-well-short-of-expectations-2016-05-04).

Bank of the Ozarks Inc.(OZRK) shares dropped 4.5% after Carston Block of Muddy Waters Capital said he was shorting the stock at the Ira Sohn hedge fund conference (http://blogs.marketwatch.com/thetell/2016/05/04/live-blog-top-stock-picks-from-the-sohn-hedge-fund-conference/).

Time Warner Inc.(TWX) gained 1.3% after its first-quarter earnings beat Wall Street forecasts.

Kate Spade & Co.(KATE) shares were relatively unchanged after the clothing and accessories company affirmed its full-year 2016 revenue guidance (http://www.marketwatch.com/story/kate-spade-profits-fall-below-estimates-reaffirms-full-year-guidance-2016-05-04).

Other markets: After a wobbly start to the day, European markets moved lower (http://www.marketwatch.com/story/european-stocks-wobble-after-earnings-deluge-2016-05-04), as investors assessed the latest raft of earnings reports. Meanwhile in Asia (http://www.marketwatch.com/story/asian-stocks-down-on-oil-woes-slow-growth-2016-05-04), most stock benchmarks closed firmly lower after an earlier fall in oil prices and the plunge in shares of miner BHP Billiton (http://www.marketwatch.com/story/mining-firms-bhp-vale-face-44b-lawsuit-in-brazil-2016-05-03).

Metals dropped across the board (http://www.marketwatch.com/story/gold-falls-for-2nd-day-as-long-rally-pauses-2016-05-04), with gold down 0.6%, while Treasury yields were near a two-week low.

-- Sara Sjolin in London contributed to this article.

(END) Dow Jones Newswires

May 04, 2016 13:58 ET (17:58 GMT)

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