U.S. stocks finished mixed on Wednesday following the prior day's jump, with volatility still in play after minutes from the Federal Reserve had central bankers viewing the benefits of monetary stimulus as diminishing over time, and a report on payrolls was better than anticipated.
"The comments were maybe a little more bullish than we thought; there was more confidence in economic growth going forward. If the Fed expects all those things to come to fruition, that would argue certainly for continuing the tapering and possibly faster tapering'," said Darrell Cronk, regional chief investment officer at Wells Fargo Private Bank.
"So it makes the equities markets take a little bit of a pause, if the bias is to continue at an accelerated pace," Cronk added.
The U.S. dollar gained strength for a second day against the euro and the price of Treasuries and gold declined after ADP Research Institute reported U.S. companies added 238,000 workers to payrolls in December, better than the 200,000 anticipated, increased the argument for the Fed to continue its tapering.
"The U.S. labor market continues to signal acceleration heading into the New Year adding justification -- where it needed -- to Bernanke and company's decision to wind down the level of bond purchases," offered Andrew Wilkinson, chief market analyst at Interactive Brokers, referring to Federal Reserve Chairman Ben Bernanke and his central-bank colleagues, who are cutting monthly bond purchases by $10 billion to $75 billion this month.
"Most of the data, consumer and manufacturing, all suggest the employment picture is improving, ADP is just another data point that legitimizes the trend. That points to a little upward bias to Friday's report," said Cronk of Friday's nonfarm payrolls report for December.
The Dow Jones Industrial Average dropped 68.20 points, or 0.4 percent, to 16,462.74. Microsoft led blue-chip declines, which included 20 of its its 30 components. McDonald's also fell after Wells Fargo downgraded the fast-food chain to market perform from outperform.
The S&P 500 held little changed, ending at 1,837.49, down a fraction. Telecommunications fell hardest and health care fared best among its 10 major sectors.
"The market's hanging in there pretty well, given the huge move it had last year. Investors are short-term cautious about digesting some of the gains we've had," said Doug Foreman, chief investment officer at Kayne Anderson Rudick Investment Management.
Forest laboratories rallied after saying it would pay $2.9 billion in cash for Aptalis Pharma which specializes in treating cystic fibrosis and gastrointestinal troubles. Micron Technology surged after reporting better-than-expected quarterly revenue. Ford Motor rose after CEO Alan Mulally told the AP he planned to remain with the automaker, basically taking himself out of contention for the top post at Microsoft.
Twitter declined after Cantor Fitzgerald downgraded its shares to sell from hold. Shares of J.C. Penney fell sharply after the retailer released a statement saying it was "pleased with its performance for the holiday period," but gave no specific numbers.
The Nasdaq gained 12.43 points, or 0.3 percent, to 4,165.61.
The U.S. dollar gained against the currencies of major U.S. trading partners and the yield on the 10-year Treasury yield used in determining mortgage rates and other consumer borrowing costs rose 5 basis points to 2.996 percent.
On Tuesday, stocks finished higher, with the S&P 500 halting a three-session decline, as investors took an optimistic stance ahead of Friday's job report.
—By CNBC's Kate Gibson
Coming Up This Week:
Thursday: Weekly jobless claims at 8:30 a.m. Eastern. December chain-store sales. Kansas City Fed President Esther George talks about the economy at 1:30 p.m. Eastern. Minneapolis Fed President Narayana Kocherlakota talks about the economy at 8 p.m. Eastern. Companies expected to report quarterly results include Alcoa, PriceSmart, Supervalue and Texas Industries.
Friday: Nonfarm payrolls at 8:30 a.m. Eastern. Wholesale inventories for November at 10 a.m. Eastern.
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