Stocks were mixed as the prospect of the Federal Reserve resuming Treasury purchases to boost the economy countered a disappointing report on private sector hiring, sending the Dow higher.
The Dow Jones Industrial Average was up about 25 points after bobbing in and out of negative territory throughout the morning. Today's meek performance comes a day after all the major indexes rallied, putting the Dow is within striking distance of 11,000 for the first time since May.
General Electric and Alcoa rose, while AT&T and Travelers fell.
The S&P 500 and the Nasdaq fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 21.
Among key S&P sectors, about half were higher, led by cyclicals in the materials,industrials and energy sectors, while telecom and consumer discretionary stocks fell.
"Stocks seem to be taking the (employment) data more or less in stride," said Craig Peckham, equity product strategist at Jefferies. "The market place is increasing its bet on additional monetary policy easing, particularly quantitiative easing."
What is doing best are "hard asset plays," like gold and materials stocks, including Freeport-McMoRan Copper & Gold and US Steel .
"In a world where there is a concern about the pace and slope of economic recovery, that could trigger more central bank policy easing, it's logical for investors to be deploying capital to assets that are more inflation protected," Peckham said.
Investors may just be taking a breather Wednesday, after Tuesday's sharp rise and ahead of economic reports later this week, particularly September non-farm payrolls release on Friday, said Dan Cook, senior market analyst at IG Markets.
While the prospects of Fed action are priced into the market to some extent, Cook said a jobs number that is worse than expected would likely cause the market to rally further after an initial drop on the news.
Shares of Equinix plunged more than 25 percent after the telecommunications company said Tuesday that it cut its revenue targets for the third quarter and the full year due to heavy discounting and lower revenues from its Switch and Data business. Three brokerages cut their price target for Equinix on Wednesday.
Semiconductor stocks were also weak, after Morgan Stanley cut Altera and and Xilinx to "underweight" from "equalweight," due to slowing orders out of Asia. Both companies are involved in the wireless infrastructure markets. Chip companies in other businesses were also week, including Nvidia and Fairchild Semiconductor .
Also, Motorola announced late Tuesday that Verizon Wireless would sell the Droid Pro, a business-oriented phone with corporate-level security features that's based on the Google's Android operating system.
On the earnings front, shares of Monsanto rose despite posting a wider-than-expected loss in the fourth quarter, and warnings that 2011 is likely to be weak as well. Constellation Brands' shares rose after reporting second-quarter profit fell to 43 cents a share, from 45 cents a year ago, below analysts expectations for a profit of 49 cents a share. Revenue for the beverage company also fell.
Costcoposted higher quarterly profit on Wednesday as consumers began spending more on discretionary items such as apparel.
Net income rose to $432 million, or 97 cents a share, in the fiscal fourth quarter ended August 29, from $374 million, or 85 cents a share, a year earlier. The profit was two cents ahead of expectations but didn't satisfy investors, as Costo's shares fell more than 2 percent in premarket trading.
After the bell Tuesday, Yum Brands reported a 7 percent rise in third-quarter net income to $357 million, or 74 cents a share. Excluding items, profits were 73 cents a share, 1 cent better than forecast by analysts surveyed by Thomson Reuters I/B/E/S. The owner of KFC and Pizza Hut raised its 2010 earnings target to earnings of $2.48 a share before items, up from $2.43 a share.
General Electric was largely flat after the company said a$1.2 billion takeover approach it made to Wellstreamhad been rebuffed by the British oil services company.
M&T Bank saw its shares fall nearly 4 percent after Allied Banks said it will hold a public offering its 22.4 percent stake in M&T. Allied shares fell 6 percent.
Family Dollar shares were up slightly after the company announced an accelerated $250 million buyback program with Wells Fargo. The discount retailer also said its fiscal 2011 earnings per share should be $3.04 to $3.24 a share, including items.
Pfizer is considering options for its Capsugel business, which makes hard capsules for drugs, that include a possible sale. Capsugel had revenue of $740 million last year.
In M&A news, Johnson & Johnson announced it ispurchasing the Dutch biotechnology firm, Crucell, for about $2.41 billion, a move that had been expected. The acquisition will add to the health care company's vaccine business.
Gold, meanwhile, continued its record run, rising as high as nearly $1,350, before slipping back slightly, and copper prices hit a two-year high, boosted in part by a weaker dollar.
In economic news, The ADP employment report on private-sector employment for September showed a 39,000 drop in payrolls, well below expectations for a 20,000 increase.
At the same time, Challenger, Gray & Christmas said planned layoffs increased 7 percent in September, a slow pace but one that also provided little indication that the jobs picture was improving.
In other economic news, U.S. mortgage applications for home purchases rosefor a second straight week, although applications for refinancing loans fell for a fifth straight week, the Mortgage Bankers Association reported. Taking both into account, the seasonally adjusted index of mortgage applications fell 0.2 percent for the week ended Oct. 1
The European Central Bank decides on rates on Thursday, but investors are more focused on currencies ahead of an IMF/World Bank meeting later this week.
Also, Fitch Ratings said it was cutting the credit rating for the Irish government to A+ and warned of future cuts unless the nation embraces austerity measures.
On Tap This Week:
WEDNESDAY: CTIA Wireless.
THURSDAY: Monthly chain store sales; BoE announcement; ECB announcement; Kansas City Fed Pres Hoenig speaks; Consumer credit; Mosaic shareholder meeting; Earnings from PepsiCo and Alcoa
FRIDAY: Monthly non-farm payroll; Wholesale trade; NY Comic Con; IMF, World Bank annual meetings
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