Stocks Close Lower Amid Broad Decline in Tech

Stocks ended lower on Wednesday as strong manufacturing data released this morning offset declines in the technology sector.

"From a technical perspective, seeing this kind of pullback is not bad -- you want to see consolidation and see some base build," said Sean Brodrick, senior commodities analyst at "There is little that has happened this week to make the Fed hike rates; horrible home sales numbers give the Fed room to cut rates, and that's what the market is focusing on."

The Dow Jones Industrial Average fell about 80 points, or 0.6%, while the S&P 500 and Nasdaq Composite saw similar declines.

"The market has gotten a little ahead of itself and the market is convinced the Fed is going to cut rates again, but that is not a certainty at this point," said Ted Parrish, co-portfolio manager at the Henssler Equity Fund.

Investors were encouraged by economic data released earlier today. The ISM services sector index fell last month to a level slightly below economists' expectations, the said, but the index still showed that the vast sector of the economy was growing.

"We started to see the markets react more positively to good news this week," said Andrew Burkly, market strategist at Brown Brothers Harriman. "Anytime you come off a significant low you have two phases: the initial oversold launch and then markets start to realize things aren't as bad as they were when they were going down."

Just two of 10 sectors tracked by S&P traded higher, with gains seen for consumer discretionary and health care sectors. Tech and materials led the day's sector losers, while financial stocks gave up midday gains on news of further job cuts at Bear Stearns.

Intel traded lower after Morgan Stanley initiated coverage on the stock with an "underweight" rating and a price target of $22, saying it expects the company to see an inventory correction amid an aggressive pricing environment.

Memory chip maker Micron Technology also contributed to sector weakness. Shares fell after the company reported a quarterly loss late Tuesday, with results coming in below analysts' expectations.

Bear Stearns is laying off about 300 workers in its mortgage unit, or about half of the division's employees, CNBC reported on Wednesday. Bear Stearns, which confirmed layoffs of 310 employees in a midday release, reduced headcount in its mortgage unit by 240 in August.

New York light sweet crude futuresfell below $80 a barrel on the New York Mercantile Exchange following weekly inventory data, which came in above expectations. The Department of Energy said weekly crude oil inventory levels rose 1.14 million barrels, compared with the consensus forecast of 550,000.

The benchmark 10-year Treasury fell sharply, sending yields higher.

In other economic news, U.S. private employers likely added 58,000 jobs in September, according to ADP. Economists expected the ADP report to show an increase of 58,000 new private sector jobs in September. ADP also said it revised down to 27,000 from 38,000 the number of jobs created in August.

Both Asia and European stocks were mixed.

In the banking sector, Germany's largest bank, Deutsche Bank, said it expects net profit to rise in the third quarter despite big hits from global credit market problems.

Investors were also cautious ahead of Friday's September employment report from the government, analysts said.

The weak U.S. August jobs data have been seen as one of the reasons for the Federal Reserve's 50-basis point cut in key interest rates in mid-September. The move sent stock markets higher and boosted hopes for more rate cuts.