Stocks fell nearly 1 percent or more Thursday as renewed declines in oil weighed on investor sentiment amid a slew of earnings releases and Friday’s key employment report.
“There’s nervousness among momentum investors caused by some of the outperforming names either missing or giving cautious comments in earnings reports,” said Robert Pavlik, chief market strategist at Boston Private Wealth.
“I don’t think much of it is warranted,” he said, noting some profit-taking.
The major averages came off session lows after extending losses in midday trade as the S&P 500 broke through a key level of 2,087 that many analysts were watching.
Art Cashin, director of floor operations at UBS, said the next level of support is 2,063 to 2,067.
Consumer discretionary briefly fell about 2 percent as one of the greatest decliners in the S&P 500, weighed by media stocks.
At its lows the media sector was off about 11 percent for the week, on track for its worst week since October 2008, when it lost 21.87 percent.
The Nasdaq briefly fell 2 percent as biotech losses accelerated and Apple briefly turned negative. The iShares Nasdaq biotechnology ETF (IBB) fell more than 3.5 percent.
The Dow Jones industrial average traded about 120 points lower, after falling as much as 177 points. The index is on track to close at its lowest level in 6 months and post its first six-day losing streak since October. Disney traded about 3.5 percent lower, off an earlier 5.5 percent decline, while Nike fell nearly 2 percent.
“You’ve got some nervousness ahead of the jobs report, lack of a bullish impetus, narrowing leadership,” said Adam Sarhan, CEO of Sarhan Capital. “The market continues to get weaker, not stronger.”
He is watching 2,040 on the S&P 500. “Right now there’re less and less bullish drivers and concurrently more bearish drivers,” Sarhan said. “If support breaks there’s no question on my mind (that we get a correction).”
“Market participants are really groping for a new catalyst to move stocks higher,” said Marc Luschini, chief investment strategist at Janney Montgomery Scott. “There’s still some questions on the economy, the pace of growth.”
He noted there were few indications that the market was strongly concerned about an interest rate hike, as bond yields held lower, the dollar was flat, and gold traded a touch higher.
Economists expect 223,000 nonfarm payrolls on Friday, with unemployment unchanged at 5.3 percent, according to Thomson Reuters.
“I think this (jobs) report is what everyone’s keying on. We’ve kind of got mixed messages in the data this week,” said Chris Gaffney, president of EverBank World Markets.
“I think the key is average hourly earnings and if that comes with a 2 percent increase tomorrow, absolutely September comes into play,” Gaffney said.
“I think the market is really getting anxious about nonfarm payrolls,” said Doug Cote, chief market strategist at Voya Investment Management. “If it’s a moderate number, then (liftoff) could be put off, but if it’s a really big number tomorrow—if unemployment is 5.2 percent—the market struggles a little bit, raise the prospect of a September rate increase.”
Jobs data so far this week was mixed. Initial claims came in Thursday at 270,000, slightly below expectations. The private sector report from ADP showed fewer-than-expected jobs were created.
U.S. job cuts in July exceeded 100,000 for the first time in nearly four years as the military announced plans to reduce troop and civilian workforce payrolls, according to Challenger, Gray & Christmas. A year ago, U.S. companies announced plans to cut 46,887 jobs.
However, the major jump in job cuts is not expected to significantly affect Friday’s key report.
“We think this increase in announced job cuts will have no impact on the July BLS report, and only a minimal impact on the employment data over the next few years. The jump in layoffs announced in July was basically entirely due to reductions announced by the US Army that are scheduled to begin in October and be implemented over the next two years,” JPMorgan said in a morning note.
Oil continued to decline, with WTI crude settling down 49 cents, or 1.09 percent, at $44.66 a barrel. Brent dipped below $48 a barrel.
“I know that a lot of people that are bearish,” said Phil Flynn, energy market analyst at Price Futures Group. “As weak as the market feels right now the onus is on the bears to take out $40 a barrel. Really we’re following a seasonal pattern.”
Many stocks saw outsized moves amid the slew of quarterly reports towards the end of earnings season. About 80 percent of the S&P 500 have reported.
There are “tons of stocks reporting earnings. We’ve had a tough morning because they’ve been volatile,” said Phil Quartuccio, CEO of Illustro Trading. “Earnings (are) surprising on both ends.”
Viacom fell more than 15.5 percent to a multi-year low. The firm matched earnings per share estimates but missed on revenue as advertising sales declined and lack of major movie releases from the firm during the quarter.
21st Century Fox earned an adjusted 39 cents per share for the second quarter, 2 cents above estimates, but revenue missed Street forecasts. The media company also announced a $5 billion stock buyback program.
CBS reported adjusted quarterly profit of 74 cents per share, 2 cents above estimates, with revenue essentially in line. CBS benefited from higher subscription fees and increasing revenue from affiliates.
Disney extended its post-earnings plunge from Wednesday after the firm missed on revenue and disappointed investors with subscriber losses. Year-to-date, the stock is the third-best performer in the Dow.
Art Hogan, chief market strategist at Wunderlich Securities, expects some recovery in media names.
“There’s a lot of wreckage after Disney,” he said. “I think things got overdone.”
In Europe, equities closed lower as crude weighed on sentiment and the Bank of England kept rates unchanged.
Analysts said the central bank’s position could be an indication that the U.S. Federal Reserve also holds off on raising rates.
The dollar traded flat, with the euro above $1.09 and the yen attempting gains against the greenback at 124.6 yen.
Treasury yields held lower, with the 10-year at 2.22 percent and the 2-year at 0.70 percent.
Keurig Green Mountain plunged nearly 30 percent after the firm missed significantly on revenue and sales of its coffee pods fell for the first time ever. The single-serve coffee company also lowered its sales and earnings forecasts and announced it would cut 5 percent of its workforce.
Fitbit reported that its profit margins fell during the second quarter and would likely stay at current levels for the rest of the year. That news has put the fitness tracking device maker’s shares under pressure, despite seeing revenue more than triple during the second quarter compared to a year earlier.
Herbalife reported adjusted quarterly profit of $1.24 per share, 13 cents above estimates, and revenue was slightly above forecasts. The nutritional products company raised its full-year earnings guidance, even as its sales are impacted by a stronger dollar.
Tesla lost 48 cents per share for its latest quarter, smaller than the 60 cents Wall Street was predicting. Revenue was slightly above estimates, but investors are focusing on Tesla’s second cut in its sales forecast in the past year.
Reports from Con Ed, EOG Resources, Wingstop, Lions Gate, Great Plains Energy, Noodles and Co., TrueCar, Zynga and Monster Beverage are all due after the bell.
Mondelez jumped after news that Bill Ackman took at $5.5 billion stake in the snack maker and is considering a pushing for a takeover.
The Dow Jones Industrial Average traded down 126 points, or 0.72 percent, at 17,413, with Disney leading decliners and Chevron the greatest advancer.
The Dow transports briefly fell more than 1 percent as nearly all constituents declined.
The S&P 500 traded down 17 points, or 0.82 percent, at 2,082, with health care leading nine sectors lower and energy the only advancer.
The Nasdaq traded down 83 points, or 1.62 percent, at 5,056.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped above 14.
About two stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 510 million and a composite volume of nearly 2.6 billion in afternoon trade.
Gold futures settled up $4.50 at $1,089.80 an ounce.
Written by Evelyn Cheng of CNBC