Stocks fell Wednesday led by the tech-heavy Nasdaq and banks as the Dow broke a five-day winning streak.
The Dow Jones Industrial Average fell 21.72 points, or 0.2 percent, to 10,739.31, after eking out another gain in the previous session. The blue-chip index, which had fallen as much as 50 points earlier in the session, was still up 7.2 percent for September.
Microsoft and Bank of America were the top laggards on the Dow while Alcoa and Merck rose.
The S&P 500 fell 5.50 points, or 0.5 percent, to 1,134.28, and the Nasdaq slipped 14.80 points, or 0.6 percent, to 2,334.55. The CBOE Volatility Index, widely regarded as the best gauge of fear in the market, rose above 22.
"It’s probably premature to say we had a breakout the last couple days," said Ron Rowland, president and CIO at Capital Cities Asset Management. "More investors are once again looking at the reality of the situation that there’s still a lot of negative news out there."
Meanwhile, the equity strategy team at Bank of America Merrill Lynch cut its forecast for the S&P 500 Index, saying the broad-market index probably won't reach 1,300 before the end of the year. That's because Congress is unlikely to pass a new tax package before the Bush tax cuts expire Jan. 1, the strategists said in a report.
Fear of tax hikes in 2011 is likely to "constrain growth" among households and businesses in the fourth quarter, the report said. The brokerage does believe, however, that tax cuts will be restored retroactively in 2011, and it reiterated its forecast for the S&P 500 to hit 1,350 within 12 months.
Pressure was on the technology sector, with Adobe Systems plunging almost 20 percent after the software firm announced a disappointing fourth quarter forecast. In addition, at least seven brokerages cut their price targets on Adobe.
Microsoft shares fell about 2 percent after the tech giant announced it raised its dividend by 25 percentto $0.16 per share.
Ebay slipped after the online retailer said the president of its main marketplaces unit was leaving the company and that third-quarter earnings would be at the high end of its own forecast range.
PMC-Sierratumbled after the broadband communications company lowered its revenue outlook.
Meanwhile, Research In Motion advanced after news the BlackBerry maker may unveil a tablet computer to compete with Apple's iPad, according to the Wall Street Journal.
Financials were also among the laggards as Goldman Sachs and Morgan Stanley sank after Deutche Bank said the investment banks could be hurt by how international regulators interpret the risks in various asset classes.
Shares of Jefferies also plunged after the investment bank reported lower third-quarter profit and revenueas trading activity slowed.
In addition, shares of insurers slipped with MetLife and Manulife Financial both down almost 5 percent.
Metals and mining stocks were leading the S&P 500, led by Cliffs Natural Resources and Freeport-McMoran .
Gold prices hit another record high above $1,293 an ounce earlier Wednesday, but closed at $1,290 as the dollar sank.
Meanwhile, oil prices fell below $75 a barrelafter the U.S. Energy Information Administration reported crude oil inventories rose by 1 million barrels in the prior week.
Shares of the New York Times fell after the publisher said its third-quarter revenues would decline more than expectedbecause of a slowdown in digital advertising. Rival newspaper publishers also skidded, including Gannett , Journal Communications and Washington Post .
And American Airlines parent AMR plunged almost 10 percent after the company issued a third-quarter outlook that triggered a reduction in analysts' estimates. Other airline stocks were mostly lower.