U.S. stocks closed lower on Thursday, with the Nasdaq off 1.6 percent, as investors weighed declines in oil and disappointing earnings ahead of Friday's key employment report. (Tweet This)
"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 in the close. The Dow Jones industrial average ended at its lowest level in 6 months and posted its first 6-day losing streak since October.
Stocks extended losses in midday trade as the S&P 500 broke through a key level of 2,087 that many analysts were watching. The index closed below that level but held above its 200-day moving average of 2,072.
Art Cashin, director of floor operations at UBS, said the next level of support is 2,063 to 2,067.
Viacom and 21st Century Fox plunged, joining Disney in a post-earnings stock decline to bring the media sector down about 8 percent for the week so far. 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 media sector weighed on consumer discretionary, off more than 1 percent as one of the greatest decliners in the S&P 500.
Health care was the worst sector performer, falling more than 2 percent as biotechs plunged. The declines weighed heavily on the Nasdaq, which closed more than 1.5 percent lower. The iShares Nasdaq biotechnology ETF (IBB) fell 4.3 percent, while Apple reversed recent declines to end mildly higher.
The Dow Jones industrial average closed about 120 points lower, after falling as much as 177 points.
The greatest weight on the index was Disney, which closed 1.8 percent lower, off an earlier 5.5 percent decline. The stock 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.
"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 Mark 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.
"The rise in the Treasury market is a take of two separate things moving in different directions," said Eric Stein, co-director of global fixed income at Eaton Vance Management. He noted hawkish comments from policymakers balanced by "the continued selloff in commodity prices."
"It's not all about September, it's obviously about the path of rates (in the next) two to three years," Stein said.
Friday's jobs report is one of the few key pieces of data expected before the Federal Reserve meets in September and could potentially find enough impetus for raising short-term interest rates. 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."
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 mildly lower, with the euro above $1.09 and the yen little changed against the greenback at 124.7 yen.
Treasury yields held lower, with the 10-year at 2.22 percent and the at 0.70 percent.
Many stocks saw outsized moves amid the slew of quarterly reports towards the end of earnings season. About 80 percent of names in 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 14 percent and is in a bear market. 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 declined 6.4 percent after reporting earnings that topped estimates on revenue that missed. The media company also announced a $5 billion stock buyback program.
CBS gained 3.6 percent after the firm reported an 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.
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."
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 fell 13.6 percent after the firm 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 surged 17.2 percent after the firm reported earnings that beat estimates on both the top and bottom line. The nutritional products company raised its full-year earnings guidance, even as its sales are impacted by a stronger dollar.
Tesla closed down about 8.9 percent despite posting a lower-than-expected decline in earnings on revenue that beat. However, the automaker announced its second cut in its sales forecast in the past year.
The Dow transports fell 0.83 percent and is back in correction territory.
The closed down 16.28 points, or 0.78 percent, at 2,083.56, with health care leading eight sectors lower and energy and utilities the only advancers.
The Nasdaq closed down 83.50 points, or 1.62 percent, at 5,056.44.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped above 14.
About three stocks declined for every two advancers on the New York Stock Exchange, with an exchange volume of 956 million and a composite volume of 4.2 billion in the close.
Gold futures settled up $4.50 at $1,089.80 an ounce.
—CNBC's Peter Schacknow and Jenny Cosgrave contributed to this report.
On tap this week:
Earnings: Con Ed, EOG Resources, Wingstop, Lions Gate, Great Plains Energy, Noodles and Co. TrueCar, Zynga, Monster Beverage
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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