Stocks dropped on the last trading day of the session despite a series of economic reports providing evidence of returning strength in the U.S. economy.
The Dow Jones Industrial Average fell about 50 points after gaining more than 100 earlier. Caterpillar, Hewlett-Packardand IBM slipped. Boeing and Exxon rose.
The S&P 500 and the Nasdaq fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 24.
Most key S&P 500 Index sectors were lower, led by technology, materials and consumer discretionary.
Despite volatility over the last few sessions, the markets have had a stellar month, with both the Dow Jones Industrial Average and the S&P 500 Index on track for the best September since 1939; the Nasdaq is having its best September since 1998.
Still, stocks seem to be having a difficult time moving to higher levels a day after stocks ended lower. The S&P 500 Index is back under 1,145 after rising above 1,150, a level that has been a key resistance point over the last several days.
"That 1,150 level, the January peak, has been trouble," said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.
Detrick noted that the economic data continues to be strong, providing plenty of evidence that a double-dip recession isn't in the offing, but the markets may not move significantly higher until third quarter earnings season gets underway, he said.
Caterpillar's shares fell after the company said it would raise prices up to 2 percent beginning in January. Earlier the heavy-equipment manufacturer said prices would rise 2 to 6 percent because of emissions costs.
American International Group's shares surged to lead the S&P 500 Index after news the insurer worked out a plan with the U.S. government to repay taxpayers in full. The company also said it will sell two Japanese life insurance units to Prudential Financial for $4.8 billion. Prudential's shares slumped after the news.
Most financial stocks were higher, including Morgan Stanley, Citigroup and Goldman Sachs .
McCormick's shares rose in the pre-market after the maker of spices and herbs issued a quarterly-adjusted profit that beat market expectations. The company focused on valued-added, higher-margin products, and gross margins rose nearly 2 percent in the third quarter.
Shares of Mattel were flat after news Federal regulators recalled more than 10 million Fischer-Price products.
Boeing shares were higher after the aircraft manufacturer pushed back its delivery scheduled for its 747-8 freighter to mid-year 2011 to address manufacturing issues. The delay isn't expected to affect Boeing's financial results, the company said.
Johnson & Johnson shares were slightly lower as the company's chief executive testified before a House committee on the health-care company's recalls of over-the-counter medicines.
Dollar Thrifty shares were slightly higher as its shareholders vote on a $1.5 billion offer by Hertz to buy the car-rental company. Meanwhile Avis said on Wednesday it would include a $20 million break-up feein its offer for the company if Hertz walks away from the deal.
In economic news, the Chicago Purchasing Managers Index came in at 60.4 in September, up from 56.7 in August. The index, which measures Midwest manufacturing activity, was expected to come in at 56, according to Briefing.com.
Earlier, the Labor Department reported applications for jobless claims fell 16,000 last week, more than expected, down to 453,000, in a positive sign for the job market. The less volatile four-week average of jobless claims dropped to the lowest level in five months.
And second-quarter Gross Domestic Product was revised slightly higher from previous estimates to 1.7 percent, from 1.6 percent, due to upward revisions to consumer spending and business inventories, the Commerce Department said. Growth was kept in check by rising imports, the government said.
Earlier, futures failed to find direction after Ireland sought to draw a line under the debt crisis and Spain suffered another debt-rating downgrade.
Ireland's central bank said that bailing out Anglo Irish Bank could cost $46.44 billion and Allied Irish Banksneeded another $4.1 billion by the end of the year. Irish Finance Minister Brian Lenihan said on CNBC some holders of debt in troubled Irish banks face a severe haircut on their holdings, but the announcements should draw a line under the crisis.
Meanwhile, Spain saw its soveriegn credit rating downgraded to Aa1 from AAA by Moody's. The rating agency said it did not expect further rating downgrades for Spain.
European shares were lower across the board after the news. Asian markets ended mixed but mostly lower with the Nikkei 225 ending 2 percent in the red.
Federal Reserve Chairman Ben Bernanke and other regulators will testify before the Senate Banking Committee at 10 a.m. on the Dodd-Frank financial regulation reform law.
On Tap For This Week:
THURSDAY: Corporate profits; Hearing on J&J recalls; after-the-bell earnings from Accenture
FRIDAY: Personal spending; NY Fed Pres Dudley speaks; Consumer sentiment; ISM manufacturing index; Construction spending; Monthly auto sales; BP's Hayward steps down
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