U.S. equities closed mostly lower on Wednesday as investors dealt with plunging oil prices and digested scorching employment data.

The Dow Jones industrial average fell about 70 points, with Caterpillar and Chevron contributing the most losses.

The S&P 500 closed 0.2 percent lower, with energy falling more than 2.5 percent to lead decliners.

U.S. crude prices fell 5.38 percent to settle at $50.28 per barrel after data from the Energy Information Administration showed inventories rose by 8.2 million barrels last week.

"The report is certainly a negative in the short term," said Tamar Essner, an energy analyst at Nasdaq. "If you're an equity investor in the U.S., you're not going to want to put money to work [in energy] because inventories are so critical at this point."

She also said that comments made by Saudi officials earlier this week on production cuts have also been pressuring the commodity. "That sort of puts into question that perceived floor around $50," she said.

WTI also posted its worst one-day performance in 13 months.

"I think we're seeing some equilibrium in the $45-$55 range," said Eric Aanes, president and founder of Titus Wealth Management. "Personally, I'd like to see it higher, ... but barring some Middle East political event, I think we're going to remain range-bound."

The Nasdaq composite outperformed, closing above breakeven.

WTI in 2017

Source: FactSet

On the data front, private sector employment rose by 298,000 jobs last month, according to ADP and Moody's, well above a Reuters estimate of 190,000. The report encompassed the first full month under President Donald Trump, who has pledged to rebuild the nation's aging infrastructure system.

The data come just days ahead of the U.S. government's nonfarm payrolls report. Goldman Sachs and UBS raised their forecasts for the headline nonfarm payrolls figure after the strong ADP report.

Treasury yields popped following the data release, with the benchmark 10-year yield hitting its highest level since December and the two-year note yield reaching levels not seen since 2009.

"That's a very strong report. That could mean a more aggressive Fed and that could be a negative for stocks," said Bruce Bittles, chief investment strategist at Baird, referring to the ADP report. "But the fact that stocks are holding up here is surprising."

The Federal Reserve is scheduled to meet next week and is widely expected to tighten monetary policy. According to the CME Group's FedWatch tool, market expectations for a March rate hike were around 91 percent.