Stocks turned negative as oil prices climbed back above $100 a barrel on news of Libyan air strikes, and as Federal Reserve Chairman Ben Bernanke spoke before Congress for a second day.
TheDow Jones Industrial Average fell more than 15 points after bouncing between positive and negative territory a day after selling off as rising oil prices overshadowed strong manufacturing data.
Boeing and McDonald's led Dow components lower, while 3M and Hewlett-Packard gained.
The S&P 500 fell, while the Nasdaq rose. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 21.
Among key S&P 500 sectors, financials, consumer staples and utilities fell, while telecom and tech rose.
U.S. private employers added 217,000 jobs in February, beating analysts' expectations, according to ADP Employer Services, a payrolls processor, and Macroeconomic Advisers. In January, private employers added 189,000 jobs, revised from 187,000.
The market didn't move initially after the strong report, as the data has not been a great predictor for the government's monthly nonfarm payrolls report, said Todd Schoenberger, managing director at LandColt Trading.
"ADP would have needed to be much higher for the markets to rally on this report," Schoenberger said.
Economists expect the Labor Department will report a 185,000 gain in nonfarm payrolls, and a 190,000 gain in private-sector jobs when the data is released Friday, according to Reuters.
Meanwhile, oil markets remain rattled by news in the Middle East, as forces loyal to Muammar Gaddafi intensified fighting, and a Libyan warplane reportedly dropped a bomb near an oil exporting terminal.
The price of U.S. light sweet crude rose above $100 a barrel. London Brentcrude traded above $116.
Stocks in Saudia Arabia, meanwhile, tumbled to a 22-month lowamid calls for nationwide protests later this month. (Read more: Traders Watching Saudis Nervously).
“This rise in the oil price—particularly given it’s on supply issues—is just not good news for sustaining that (recovery) momentum into the second half of the year,” Karen Ward, global economist at HSBC said.
Gold, meanwhile, soared above $1,438 an ounce, a new record, as silver also traded at record levels, above $34.80 an ounce. The dollar fell against a basket of currencies, and the euro rose to a four-month high against the U.S. currency.
Semiconductor stocks soared Wednesday after JPMorgan upgraded the sector to "constructive" from "cautious." The brokerage cited Texas Instrumentsas its top pick, raising its rating on the stock to "overweight" from "neutral." It also raised Xilinx and ON Semiconductor to "overweight" from "neutral."
Shares of Apple traded flat ahead of the iPhone maker's expected unveiling of the latest version of its tablet computer, the iPad.
Yahoo , meanwhile, gained after news the Internet site is in talks to exit its joint venture in Japan with SoftBank.
Tivo , however, sank a day after reporting abigger loss than analysts expected, and forecasted slowing sales.
In earnings news, Costco fell slightly despite posting a 16 percent jump in quarterly profit, boosted by strong sales during the holiday season, while BJ's Wholesale was unchanged despite beating expectations.
Office supplies retailer Staples slumped after reporting a lower-than-expected quarterly profitas inclement weather in many of its markets kept shoppers away.
Bernanke addressed Congress for a second day Wednesday after testifying Tuesday before the Senate Banking Committee Tuesday. Today he addressed the House Financial Services Committee.
Bernanke said Tuesday that the spike in oil prices was not hurting the economy so far. But sustained rises in oil or other commodity prices could be a threat "both to economic growth and overall price stability," he said.
The Fed Chairman also said the risk of deflation had receded.
In other economic news, the Fed’s beige book, released at 2 p.m., will offer further clues on the health of the economy.
New data on applications for home mortgages released before the bell showed applications fell last week and refinance activity dropped.
Kansas City Federal Reserve President Thomas Hoenig speaks before the Council on Foreign Relations in New York at 8 a.m. and Atlanta Fed President Dennis Lockhart speaks at 2:15 p.m. in Atlanta.
Shanghai, China's most populous city, will raise minimum monthly wages by 14 percent from Aprilto help citizens cope with rising prices, the city said on Wednesday. The Chinese government is encouraging wage hikes as it wants to boost consumer spending and reduce the economy's reliance on exports.
Shares in Europe fellas the conflict in Libya deepened.
On Tap Next Week:
WEDNESDAY: Oil inventories, Federal Reserve's Beige Book; Atlanta Fed President Lockhart speaks.
THURSDAY: Chain store sales, ECB announcement, Monster employment index, jobless claims, productivity and costs, ISM non-manufacturing index, natural gas inventories, money supply; Minneapolis Fed President Kocherlakota speaks, Atlanta Fed President Lockhart speaks; earnings before-the-bell from Heinz, Kroger; earnings-after-the-bell from Novell.
FRIDAY: Non-farm payrolls report, factory orders; Federal Budget Deadline.
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