U.S. stocks closed lower Thursday as investors awaited a post-close speech from Fed Chair Janet Yellen. (Tweet This)
The major averages more than halved losses in afternoon trade. Oil turned higher, helping stocks shake off pressure from declines in global markets overnight. Utilities and energy led S&P 500 sector advancers.
"Crude was pretty strong on this one. We've broken through some pretty strong resistance on the SPX," said JJ Kinahan, chief strategist at TD Ameritrade. "There was more support near 1,910, which coincides with 1,900 in the futures."
"We really haven't had a great reason to sell off in the last two days because besides the durable goods numbers we haven't had much news," he said. "I think it's going to be very difficult for stocks to hold their heads up here because of some of the nervousness ahead of the Fed."
Analysts also attributed the recovery attempt to some short-covering ahead of Yellen's 5 p.m., ET, speech, which could provide clarity on the Fed decision last week.
The Dow Jones industrial average closed about 79 points lower after falling as much as 263.53 points. Caterpillar was the greatest weight on the index, closing nearly 6.3 percent lower on news the firm will cut up to 5,000 jobs by the end of 2016 and lowered guidance.
The Nasdaq composite more than halved losses but failed to hold gains for 2015, joining the other major averages in negative territory year-to-date.
"After being down five out of six days, I think you see some bargain hunters come in," said Paul Nolte, portfolio manager at Kingsview Asset Management. "The volume numbers are still pretty weak. You can't say we may be done with the selling either. Valuations are still on the high side."
The Dow remained more than 10 percent away from its 52-week high, in correction territory. The Nasdaq and S&P briefly joined the Dow in correction mode but closed out of it. The indexes are on track for a weekly loss of more than 1 percent.
"If we want to go back to fair value we may have more digging to do," said Jack Ablin, chief investment officer at BMO Private Bank. "If we can start to see revenue growth that can patch over a lot of problems. Right now the data coming through is not supporting those expectations."
"I think it's a simple mismatch of reality and expectations, and that's what corrections are made of," he said. "I don't see a bear market. We just need a reset."
The number of new 52-week lows in the S&P 500 was the most since Aug. 21, the Friday before the "Flash Crash" of Aug. 24.
Fed Chair Janet Yellen is scheduled to speak on inflation and monetary policy at a 5 p.m., ET, speech at the University of Massachusetts, where the audience will not be able to ask questions.
"I don't think there's going to be much ahead of that," said Peter Boockvar, chief market analyst at The Lindsey Group. "We heard from Yellen for an hour last week after (the Fed) statement. I'm sure she's going to be a focus but I'm not sure there's much else she's going to say."
"It's all about Yellen today," said Peter Cardillo, chief market economist at Rockwell Global Capital. She could "be more hawkish. ... Maybe she might indicate that interest rates are going up this year."
He's watching to see if the S&P 500 can hold 1,900 and indicate a bottom.
"We're approaching the last week of the month and generally speaking this is a sloppy time," Cardillo said. "With the fear factor at a very high level it can only mean wider gyrations with light volume. From that perspective, it's very difficult to see a market respond to some good news."
Major European stock indices closed about 2 percent lower as investors continued to digest the Volkswagen emissions test scandal.
Japan's Nikkei plunged 2.76 percent in its first day open after a three-day national holiday. The Markit/Nikkei Japan flash manufacturing purchasing managers index (PMI) fell for the first time in three months.
The Hang Seng fell, while the Shanghai Composite closed mildly higher.
"It's just more of a continuation of the fact that we keep getting more data points that indicate growth is decelerating," said Nick Raich, CEO of The Earnings Scout. "This morning's durable goods certainly doesn't help."
In morning U.S. economic news, durable goods showed a decline of 2 percent. Weekly jobless claims were 267,000.
August new home sales came in at 552,000.
In pre-market trade, Dow futures were briefly down more than 150 points, while S&P 500 and Nasdaq futures also held lower.
Treasury yields held lower, with the at 0.68 percent and the 10-year yield at 2.13 percent. Earlier, the 10-year yield fell below 2.10 percent for the first time since the end of August selloff.
The Treasury Department auctioned $29 billion of 7-year notes at a high yield of 1.813 percent.
The U.S. dollar traded lower against major world currencies, with the euro at $1.122 and the yen at 120.0 yen against the greenback.
The dollar hit record highs against emerging market currencies such as the Mexican peso, the Brazilian real and the South African rand.
On the earnings front, Accenture reported quarterly profit of $1.15 per share, beating estimates by three cents, with revenue also above forecasts. The stock closed a touch lower.
The Dow transports closed down more than 1 percent as United Continental led nearly all constituents lower.
The closed down 6.52 points, or 0.34 percent, at 1,932.24, with health care leading seven decliners and utilities leading advancers.
The health care sector, one of the better-performing sectors for the year, briefly turned negative for 2015 in intraday trade but held gains for the year in the close. Consumer discretionary is the only other positive sector year-to-date.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 23.
About three stocks declined for every two advancers on the New York Stock Exchange, with an exchange volume of 1.0 billion and a composite volume of 4.0 billion in the close.
Crude oil settled up 43 cents, or 0.97 percent, at $44.91 a barrel. Gold futures ended up $22.30 at $1,153.80 an ounce.
On tap this week:
5:00 p.m.: Fed Chair Janet Yellen on inflation/policy at University of Massachusetts
8:30 a.m.: Real GDP Q2 (third)
9:15 a.m.: St. Louis Fed's Bullard
1:25 p.m.: Kansas City Fed President Esther George
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