(Bloomberg) -- U.S. stocks retreated from a three-month high, after data on payrolls and remarks from Federal Reserve Chair Janet Yellen lifted bets that the central bank is closer to raising interest rates.
Yellen’s comment that December remains a “live possibility” for a rate increase put the brakes on a rally that had carried the Standard & Poor’s 500 Index to within 1 percent of its record. Earnings news also weighed on sentiment as disappointing results from Time Warner Inc. and 21st Century Fox Inc. sent media companies to their steepest decline since August. Energy shares followed oil lower, falling for the first time in six sessions.
The S&P 500 slipped 0.4 percent to 2,101.42 at 3:04 p.m. in New York, after yesterday reaching the highest level since July. The Dow Jones Industrial Average declined 51.18 points, or 0.3 percent, to 17,866.97. The Nasdaq Composite Index fell 0.2 percent.
“We’ve come back a long way since the end of September, but we’re not going to go straight back to a record,” said Thomas Garcia, head of equity trading at Thornburg Investment Management Inc. in Santa Fe, New Mexico. “Investors are waiting to get more data points this week to assess a potential rate hike in December. Technicals may also be playing a role in keeping us from going much higher today.”
Fed Chair Yellen, speaking before the House Financial Services Committee, said an improving economy has set the stage for a December interest-rate increase if economic reports continue to assure policy makers that inflation will accelerate over time. No decision has yet been made on the timing of a rate increase, she cautioned.
Along with remarks from Yellen, investors will be listening for further hints on the Fed’s intentions on rates from two other officials, with New York Fed’s William Dudley and Vice Chair Stanley Fischer also scheduled to speak today. Traders now price in a 58 percent chance the central bank will increase rates at its December meeting, up from 50 percent yesterday and 34 percent last week before its October gathering.
As policy makers look for more progress in the labor market, a report today showed companies added 182,000 workers to payrolls in October, signaling steady improvement. Separate data showed the U.S. trade gap shrank in September to a seven-month low, while another gauge showed service producers unexpectedly expanded in October at the second-fastest pace in a decade.
The ADP jobs report today is a precursor to Friday’s government data, in which economists forecast the economy added 182,000 jobs, with an estimated 168,000 added to private payrolls. The unemployment rate is expected to slip to 5 percent from 5.1 percent in September.