Early stock rally turns into sell-off

A strong morning rally for stocks turned into an afternoon sell-off Wednesday, reminding investors that the market remains volatile.

Stocks started the day with sharp gains on optimism that policymakers in Asia will do more to help boost growth in the region. Japan’s stock market logged its biggest gain in almost seven years after comments from the country’s prime minister raised expectations of more measures to shore up economic growth.

The stock market then drifted gradually lower after a classic good-news-is-badnews moment. A government report released at midmorning showed that the number of available jobs jumped sharply in July to the highest level in 15 years. That added to evidence that hiring remains strong and may prompt Federal Reserve policymakers to raise interest rates at their next meeting this month.

By the close, the Dow Jones industrial average had swung more than 400 points from its peak of the day. The index had surged a day earlier, logging its second-best day of the year.

The report “poured a bit of cold water on the market,” said Karen Cavanaugh, a senior market strategist at Voya Financial. “We will definitely have some more volatility, but that’s part of a normal market.”

The Dow closed down 239.11 points, or 1.5%, at 16,253.57. The Standard & Poor’s 500 index dropped 27.37 points, or 0.8%, to 1,942.04. The Nasdaq composite fell 55.40 points, or 1.2%, to 4,756.53.

Declines Wednesday were led by energy stocks, which fell as the price of oil slumped for a third straight day.

Oil dropped on concerns that global supplies are still outpacing demand. U.S. crude fell $1.79 to close at $44.15 a barrel in New York. Brent crude, a benchmark for international oils used by many U.S. refineries, fell $1.94 to close at $47.58 in London.

Among individual stock movers, Barnes & Noble was a big loser. The stock sank $4.50, or 28%, to $11.80 after the troubled bookseller reported a wider first-quarter loss as sales of its Nook e-reader and digital books fell sharply. Its college bookstore business, which was the only unit to post an increase in sales in the quarter, was spun off last month.

Netflix was the biggest gainer in the S&P 500 index. The video streaming company snapped a seven-day losing streak, gaining $4.23, or 4.5%, to $99.18 after the company said it would bring its service to four more Asian countries next year.

In Europe, France’s CAC 40 advanced 1.4%. Germany’s DAX rose 0.3%. Britain’s FTSE 100 rose 1.3%.

The price of gold fell $19 to $1,102 an ounce.