U.S. stocks closed off session highs on Wednesday as a renewed decline in oil and disappointment on Disney earnings pressured stocks, amid mixed signals on the timing of an interest rate hike. (Tweet This)
"I think there are really two things going on," said Jack Ablin, chief investment officer at BMO Private Bank. "One is there's a growing sense the Fed doesn't know what it's going to do. They're going to take it as it comes. The other thing holding back investors incrementally is we have a jobs report Friday."
Stocks attempted mild gains after coming off highs as oil reversed to fall more than 1 percent lower. Energy was one of two lagging sectors in the S&P 500, while Chevron added to Disney's pressure on the Dow.
"As oil turned lower, so did the market," said Paul Nolte, portfolio manager at Kingsview Asset Management.
Crude oil settled down 59 cents at $45.15 a barrel, setting a fresh post-March low. Gasoline inventories rose, while crude stockpiles declined more than expected.
The Nasdaq Composite ended about 0.7 percent higher, trimming an earlier 1 percent jump from a reversal in Apple and surge in Netflix. The Dow Jones industrial average failed to hold higher in the close, giving back the morning's 100-point gain.
Apple closed up nearly 0.7 percent, bucking initial losses of 2 percent and two days of declines that plunged the stock into correction territory.
On Wednesday, Bank of America/Merrill Lynch cut its rating on the stock to "neutral" from "buy," saying iPhone growth is decelerating and that Apple Watch, Apple Pay, and Apple Music will take time to ramp up.
Jim Moran, general partner at North Bridge Venture Partners and Growth Equity, is still bullish on Apple. He said the firm also faces some near-term headwinds from lack of success in Apple TV and noted that the stock usually dips after reporting earnings.
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"Apple stopped going down. It's up today," said James Meyer, chief investment officer at Tower Bridge Advisors. "It's more a relief rally than anything else."
"There's a lot of news that will allow people to fester and there's not a lot of real bright sunny stories to tell that will make people excited," he said.
Shares of Disney plunged more than 9 percent after missing on revenue in its earnings report after the close Tuesday. The stock was the greatest blue chip decliner, weighing about 70 points on the index.
Disney had a solid run up to its earnings report, with 17 percent gains year-to-date.
5-day Disney performance
Netflix traded about 2.6 percent higher after the company late Tuesday confirmed plans to expand into Asia. Guggenheim Partners also initiated coverage with a "buy" rating and a price target of $160, a 30 percent upside.
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The Dow transports ended up 0.12 percent, off an earlier gain of more than 1 percent. Shipping company Matson led advancers with a 6 percent gain following good earnings.
Stocks closed lower on Monday and Tuesday as low oil prices and the decline in Apple weighed.
"If anything we may be just due for a bounce back. We've had three down days," said Randy Frederick, managing director of trading and derivatives at Charles Schwab. "I think earnings and economic data (are) driving the market right now."
Treasury yields held near recent highs, with the at 0.73 percent and the 10-year yield near 2.27 percent. The dollar traded flat against major world currencies, while the euro held near $1.09.
"The bond market has gotten used to the idea the Fed is going to do something," said Daniel Deming, managing director at KKM Financial.
"To some degree, in the current environment there's not a lot of concern that the market's going to move one way or the other," Deming said, noting that there was major selling pressure out of August VIX calls.
Economic releases were mixed. The non-manufacturing ISM index soundly beat expectations, hitting a .
The ADP report came in at 185,000, below expectations for 215,000 private-sector payrolls. The July trade report showed the deficit widened to $43.84 billion.
Earlier, futures fluctuated ahead of the ADP payroll data. While the report is not often correlated with Friday's jobs report, it sometimes indicates direction. Economists forecast 223,000 nonfarm payrolls, which is one of the final key pieces of data the Fed will review before it September meeting.
Futures extended gains after Federal Reserve Gov. Jerome Powell said Wednesday on CNBC's "Squawk Box" that the labor market continues to be strong, but he has not made up his mind yet on whether interest rates should be raised next month.
"Nothing has been decided and I haven't made any decisions of what I would support and certainly the committee hasn't," he said. "We're still working with the same framework, we're looking for some further improvement in the labor market and reasonable confidence on inflation going back to 2 percent in the medium term. I'm going to be very focused on the data from now until the meeting, particularly the labor market data."
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Overnight, markets digested hawkish comments from another voting member, Atlanta Fed President Dennis Lockhart. In a Wall Street Journal report, Lockhart said the economy is ready for an increase in short term rates and conditions would have to deteriorate significantly in order to persuade him not to move.
Lockhart is one of the first Fed officials to speak since the policymakers met last week, and his comments sent the dollar and bond yields higher.
"I think it's a market that is still going to question whether the Fed raises in September or December," said Peter Cardillo, chief market economist at Rockwell Global Capital. "The trend (in the jobs data) remains positive."
Major U.S. Indexes
The Dow Jones Industrial Average closed down 10.22 points, or 0.06 percent, at 17,540.47, with UnitedHealth leading advancers and Disney the greatest laggard. Exxon Mobil closed flat.
The closed up 6.52 points, or 0.31 percent, at 2,099.84, with information technology leading seven sectors higher and telecommunications, energy and consumer discretionary the only laggards. Consumer staples hit an all-time high.
The Nasdaq closed up 34.40 points, or 0.67 percent, at 5,139.94.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded above 12.
Decliners were a hair ahead of advancers on the New York Stock Exchange, with an exchange volume of 909 million and a composite volume of nearly 3.6 billion in the close.
Gold futures for December delivery settled down $5.10 at $1,085.60 an ounce.
After the close, reports are expected from Tesla Motors, Fitbit, Keurig Green Mountain, CBS,21st Century Fox, Weight Watchers, Zulily, and TransOcean.
In earnings reports before the bell, Dish Network jumped 4 percent after the firm soundly beat estimates on earnings per share. However, the company reported it lost 81,000 subscribers during the quarter, compared to 44,000 a year earlier.
Time Warner fell 9 percent, partly in sympathy with Disney. The media stock beat on both the top and bottom line on strong TV licensing and video game-related results at the company's Warner Brothers unit.
Priceline Group gained 5.2 percent after posting earnings that topped expectations and revenue above forecasts, with a better-than-expected increase in gross bookings.
Discovery Communications plummeted 12 percent on earnings that missed expectations slightly as the cable programmer was hurt by a stronger dollar, despite growth in international distribution revenue.
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In Europe, equities closed higher following a slew of positive data and earnings, led by French bank Societe Generale which rallied 8 percent after reporting earnings that beat expectations. However, the Greek ATHEX Composite sold off for the third day in a row since the local exchange reopened on Monday after five weeks of closure.
Asian stocks closed mixed, with the Shanghai Composite off 1.6 percent despite China posting its best Markit PMI services report in 11 months. The Nikkei and Hang Seng closed higher.
—CNBC's Peter Schacknow and Jenny Cosgrave contributed to this report.
On tap this week:
Wednesday
Earnings: Time Warner, SodaStream, Spark Therapeutics, Wendy's, CBS, Keurig Green Mountain, Weight Watchers, Zulilly, Tesla Motors, Fitbit, Virtu Financial, Kate Spade, Lumber Liquidators, Discovery Communications, Ralph Lauren, Chesapeake Energy, Liberty Media, Motorola Solutions.
Thursday
Earnings: Viacom, Mylan Labs, Michael Kors, AMC Networks, Duke Energy, Molson Brewing, Viacom, 3-D Systems, Wingstop, Zynga, Lions Gate, SeaWorld, NY Times, OM Asset Management, Generac, Becton Dickinson, Con Ed, EOG Resources, Mohawk, Shutterstock, Clovis Oncology, TrueCar.
08:30 a.m.: Initial claims
Friday
Earnings: Berkshire Hathaway, Allianz, Hershey, BioCryst Phama, Cablevision, Groupon, Brookfield Asset Management, Sirona
08:30 a.m.: Employment report
03:00 p.m.: Consumer sentiment
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