NEW YORK - Stocks sank Wednesday as a sharp drop in the price of oil dragged down energy companies. U.S. crude closed below $40 a barrel for the first time since August.
Investors continued to weigh the implications of potential changes in interest-rate policy around the world. The European Central Bank will meet Thursday to discuss increasing its stimulus program, and the Federal Reserve is likely to raise rates for the first time in nine years at its mid-December policy meeting.
The Dow Jones industrial average fell 158.67 points, or 0.9 percent, to 17,729.68. The Nasdaq composite lost 33.08 points, or 0.6 percent, to 5,123.22. The Standard & Poor's 500 index fell 23.12 points, or 1.1 percent, to 2,079.51.
Energy stocks in the S&P 500 sank 3.1 percent compared with a 1.1 percent decline in the broader market.
The price of oil was lower all day, and the losses accelerated in the afternoon after the Energy Department reported that U.S. crude inventories rose by 1.2 million barrels last week, while analysts had expected a decline.
Benchmark U.S. crude dropped $1.91, or 4.6 percent, to $39.94 a barrel on the New York Mercantile Exchange. Brent crude, which is used to price international oils, fell $1.95, or 4.4 percent, to $42.49 a barrel in London.
Exxon Mobil fell $2.34, or 3 percent, to $79.55; Chevron lost $2.33, or 2.5 percent, to $90.25, and drilling-rig operator Transocean fell 37 cents, or 2.6 percent, to $13.83.
Among investors, the consensus is that the Fed will raise rates at its Dec. 15-16 meeting. That thesis was reinforced Wednesday, when Fed Chair Janet Yellen indicated that the U.S. economy is on track for an interest-rate hike this month, though she was careful to point out that the Fed will need to review upcoming data before a final decision.
The data Yellen referred to includes Friday's November jobs report. Economists forecast that U.S. employers created 200,000 jobs last month, and that the unemployment rate remained steady at 5 percent. The payroll processor ADP said the private sector created 217,000 jobs in November.
In a speech at the Economic Club of Washington, Yellen said, "When the [Fed's Open Market Committee] begins to normalize the stance of policy, doing so will be a testament . . . to how far our economy has come in recovering from the effects of the financial crisis and the Great Recession."
Government bond prices fell after her comments. The yield on the 10-year Treasury note rose to 2.18 percent, from 2.15 percent late Tuesday.
Investors expect that the European Central Bank will move in the opposite direction Thursday and expand its economic-stimulus program either by expanding its bond purchases or by cutting interest rates further.
In fuel-futures trading in New York, wholesale gasoline fell 7 cents, or 5.1 percent, to $1.293 a gallon; heating oil fell 6.4 cents, or 4.7 percent, to $1.305 a gallon; and natural gas declined 6.6 cents, or 3 percent, to $2.165 a gallon.
In metals trading, gold fell $9.70, or 1 percent, to $1,053.80 a troy ounce; silver fell 7 cents to $14.01 an ounce; and copper fell 4 cents to $2.033 a pound.