Stocks declined Wednesday as readings on employment and manufacturing came in weaker than expected.
ADP Employer Services said private employers cut 298,000 jobsin August, fewer than the downwardly-revised 360,000 jobs lost in July, but considerably worse than expectations of 250,000.
And planned layoffs fell 21 percent to 76,456 last month from July, according to a report from outplacement consultant Challenger, Gray & Christmas.
These reports are closely watched for insight on the employment picture ahead of the Labor Department's August jobs report, due out Friday. Economists expect to see that 233,000 jobs were lost, slightly fewer than the 247,000 lost in July, and that the unemployment rate ticked up to 9.5 percent.
"[W]e reckon Friday's official number will be about 250K. That's still terrible, but it does mean that the trend towards smaller net job losses continues," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients. "The move to payroll stability ... is some way off yet, though."
In the morning's other economic news, factory orders rose 1.3 percentin July, the fourth straight increase but smaller than the 2.2 percent expected. Nonfarm productivity rose at a 6.6 percent annual rate in August and mortgage applications fell by a seasonally adjusted 2.2 percent last week as demand for both purchase and refinance loans slipped.
This came after stocks tumbled 2 percentTuesday, their third straight decline and longest losing streak since June. The bulk of the losses came from the financial sector as investors got the jitters from whispers that another major bank failure was in the works.
Investors will be watching financials closely again today, including Bank of America , Citigroup , Wells Fargo , AIG and CIT Group .
Fannie Mae and Freddie Mac both tumbled more than 15 percent.