Stocks struggled Wednesday after tepid reports on employment and the services sector.
This came after a two-day rallythat sent stocks up more than 2 percent as investors were encouraged by earnings and economic news.
The ISM said its nonmanufacturing index, which measures the strength of the services sector, rose to 50.5 in January from 49.8 in December. Anything above 50 indicates growth, which is a significant shift for the sector, which accounts for about 80 percent of the economy.
"While signaling economic conditions that are vastly improved from late 2008/early 2009, this index contrasts with considerably perkier manufacturing indicators," Joshua Shapiro, chief economists at MFR, wrote in a note to clients. "Obviously the non-manufacturing indicator represents a much larger chunk of the economy than the manufacturing index, and its recent performance underscores the difficult conditions still facing the overwhelming majority of U.S. businesses."
ADP reported that 22,000 jobs were lost from private payrolls in January, less than the 30,000 expected and consistent with the firm's projection that there will be job growth in February.
However, Challenger, Gray & Christmas said US employers announced last month plans to lay off more than 71,000 workers, the first time since last July that planned job cuts rose.
Both reports are being closely watched by Wall Street ahead of Friday's jobs report from the government. Economists are currently expecting to see that 5,000 jobs were added to nonfarm payrolls in January after a loss of 85,000 in December.
Mortgage applications jumped 21 percentlast week amid a wave of refinancing.
Still to come: The weekly report on crude oil inventories from the EIA is due out at 10:30 am.
Pfizer, one of the prior session's best performers, was the biggest Dow decliner today after the drug maker's earnings and outlook fell short of expectations.
McDonald's , Wal-Mart and Cisco were among the few Dow gainers.
McDonald's got a boost from Goldman Sachs, which added the fast-food stock to its "conviction buy" list.
More bad news for Toyota: Now it seems the 2010 Prius may have brake problems. It says dealers have received several dozen complaints, including, apparently, Apple co-founder Steve Wozniak.
And the hits just kept on coming: US Transportation Secretary Ray LaHood said, "If you own one, I say stop driving. Return it now," during a congressional hearing. He later revised that advice in a press conference, suggesting Toyota drivers take their cars to a Toyota dealership immediately but refrained from saying "Stop driving."
Toyota stock is down more than 5 percent today.
Rival Ford continued to ride the wave of investor enthusiasm after reporting its sales rose 35 percent in January.
There's a lot of buzz about bonuses this morning. Amid public outrage over AIG bonuses, the insurance giant said 97 percent of its employees agreed to voluntarily reduce their "retention" bonuses.
And Bank of America has approved more than $4 billion in bonus pay for 2009 for its investment bankers and traders, according to the Wall Street Journal.
Earnings from the media sector have been better than expected.
Comcast, the prospective new owner of CNBC parent NBC Universal, reported earnings of 33 cents a share that beat Wall Street expectations.
And Time Warner also beat expectations on the strength of big movie releases in the past quarter.
This came after News Corp.beat Wall Street estimates after the bell Tuesday.
Cisco Systems and Yum Brands are the most prominent companies reporting earnings after today's closing bell.
Fed governor Kevin Warsh will speak to the New York Association For Business Economics today, with his speech scheduled to begin at 1 pm.
Still to Come:
WEDNESDAY: ISM services index; weekly crude inventories; Fed's Warsh speaks; Earnings from Cisco, Visa and Yum Brands after the bell
THURSDAY: Senate hearing on NBC-Comcast; Tea Party Convention; chain-store sales; ECB, BOE announcements; weekly jobless claims; factory orders; Earnings from GlaxoSmithKline, Vodafone, Kellogg, MasterCard, Northrop Grmman, Sony, Unilever and Burger King
FRIDAY: Earnings from Aetna and Tyson Foods
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