Stocks tumbled Wednesday following disappointing readings on the service sector and employment situation, as well as a cautious outlook from Dow component P&G.
Stocks had opened flat but began to slide after the service-sector report. The service sector is a crucial component for the recovery, representing 80 percent of economic activity.
The ISM reported its service-sector index fell to 46.1in July from 47 in June. Economists had expected the gauge to rise to 48. Any readings below 50 indicate contraction.
This came despite another encouraging reading on manufacturing: Factory orders unexpectedly rose 0.4 percent in June.
Earlier, a pair of bleak readings on employment set the mood for today's trading.
ADP said 371,000 jobs were cutfrom private-sector payrolls in July, more than the 335,000-loss expected.
This came after Challenger, Gray & Christmas reported that planned job cuts jumped 31 percent last month.
Both reports are being watched closely ahead of Friday's jobs report from the government, which is expected to show 320,000 jobs were dropped from nonfarm payrolls in July, following a loss of 467,000 in June.
Still, the White House was optimistic that the worst may be over.
"We have pulled far back from the edgeof descending into another economic depression" White House spokesman Robert Gibbs said.
And ADP said the U.S. is on track for job growth in early 2010.
Oil fell back below $70 a barrelafter a report showed crude supplies increased by 1.67 million barrels last week.
Banking was among the only advancing sectors today. Bank of America and JPMorgan were the biggest percentage gainers on the Dow.
Citigroup rose after CEO Vikram Pandit announced plans to sell 20 businessesin the consumer finance area, most of them in Europe.
Trading in Citi is expected to be heavy today as the bank recently completed an exchange of its preferred stock for common stock; the S&P will be rebalanced at the close today to reflect Citi's increased weighting in the index.
Ford advanced after Toyota's chairman said the US auto market will recoverand be stronger than ever.
General Motors' chairman said the board told management this week to bring some of its new vehicles to market faster.
A Senate vote on extending the "Cash for Clunkers" program could happen as early as today, though party bickering may push it to Saturday, Sen. Maj. Leader Harry Reid said.
The big earnings news this morning was from Procter & Gamble. The company, which makes Tide laundry detergent and Pampers diapers, beat expectations but delivered a cautious outlook for the current quarter.
Cisco is also going to be in focus today ahead of earnings from the tech bellwether, due out after the bell today.
Meanwhile, Japanese electronics maker Sony is about to take on Amazon, offering a cheaper digital-book reader, which will sell for $199 and $299, with the difference being the size of the screen. Amazon's Kindles sell for $299 and $489. The Sony reader will be available through Wal-Mart and Best Buy.
Kraft Foods fell more than 1 percent after the mac-and-cheese maker beat earnings estimates after the bell Tuesday but sales disappointed.
Electronic Arts shares really took a hit after the videogame maker reported a smaller-than-expected lossbut said revenue tumbled 20 percent.
Whole Foodsbeat estimates, sending its shares up more than 20 percent.
President Obama will deliver remarks on the economic outlook in Wakarusa, Indiana — he's scheduled to speak at 11:55 am New York time.
WEDNESDAY: Possible Senate vote on "Cash for Clunkers;" Earnings from Cisco, News Corp. and Prudential after the bell
THURSDAY: Chain-store sales; weekly jobless claims; Earnings from Sirius XM, Unilever
FRIDAY: July jobs report; consumer credit; Earnings from Liberty Media
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