Wall Street extended its pullback Wednesday as traders, retrenching from an optimistic stance early in the week, awaited signs of how well corporate earnings and the job market have held up in an uneven economy.
In midafternoon trading, the Dow Jones industrial average fell 85.51, or 0.61 percent, to 13,961.80. The Dow moved back above the 14,000 mark on Monday after spending 2 1/2 months below that level amid concerns about soured mortgages, tighter access to credit and the ongoing housing market slump.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 8.50, or 0.55 percent, to 1,538.13, and the Nasdaq composite index fell 20.07, or 0.73 percent, to 2,727.04.
The market showed little conviction for a second day as economic readings offered few surprises and as traders looked for indications -- possibly Friday's September employment report -- of whether the market's sharp rebound from mid-August lows has been warranted.
Homebuilders rose amid a sense among some analysts that the housing market might have hit bottom. Meanwhile, semiconductor stocks mostly lost ground on concerns about pricing pressures.
The moves come ahead of a rush of reports from companies over the recently completed third quarter and Friday's jobs number, which can signal whether consumer spending will continue apace. Wednesday's pullback also follows a reading on the nation's service sector, whose industries account for 80 percent of U.S. economic activity, that showed a decline as expected.
"There are a lot of cross currents," said George Shipp, chief investment officer at investment adviser Scott & Stringfellow in Richmond, Va. "The general pattern is that the U.S. economy is slowing."
Bond prices slipped Wednesday after the economic readings and as stocks came off their lows. The yield on the benchmark 10-year Treasury note rose to 4.57 percent from 4.53 percent late Tuesday. Bond prices move opposite their yields.
Wall Street appears to be taking many economic readings in stride, perhaps expecting some slowdown before the Federal Reserve's rate cut is reflected in economic data. Often, such cuts can take more than a year to fully work themselves into the economy.
The Institute for Supply Management reported that the service sector expanded at a slower pace in September than in August. The trade group's non-manufacturing index fell to 54.8 from 55.8 in August as expected; the index is now at its lowest point since March. A reading above 50 indicates economic expansion, while a figure below 50 signals contraction.
A weaker ISM service sector report could have ignited investor enthusiasm for another rate cut by the Fed, which lowered its key lending rate last month by a larger-than-expected half percentage point. Many investors expect the central bank to trim rates further this year, but there is debate over whether another reduction might come at the Fed meeting Oct. 30-31 or in December.
In other economic news, home buying has continued at its sluggish pace. The Mortgage Bankers Association said mortgage application volume fell 2.7 percent in the week ended Sept. 28. The MBA composite index, which gauges the level of mortgage applications, fell to 636.7 from 654.2 a week earlier.
"With all those numbers, unless it's really bad we're fine because people can say it's still a function of the dislocations that we saw in August," said Kurt Wolfgruber, chief investment officer at OppenheimerFunds Inc., adding that it is still too soon to see the full effects of the Fed's move.
Among sectors showing movement, homebuilder stocks rose again as investors began the fourth quarter betting the sector would see an improvement. Lennar Corp. rose $1.12, or 4.6 percent, to $25.84, while Pulte Homes Inc. rose 45 cents, or 2.9 percent, to $15.95.
Chip stocks slid amid unease over pricing competition. Micron Technology Inc. fell $1.02, or 8.7 percent, to $10.77 after issuing a forecast that disappointed Wall Street. Intel Corp. fell 66 cents, or 2.5 percent, to $25.72 and was one of the biggest decliners among the 30 stocks that make up the Dow industrials.
But Shipp is optimistic some quarterly results will meet tempered expectations.
"Earnings season is coming up and forecasts have been ratcheted down to very beatable levels."
In corporate news, Germany's Deutsche Bank AG (DB) on Wednesday said it would book charges totaling about $3.1 billion in the third quarter due to losses on loans, leveraged loans and structured credit products amid turmoil in the mortgage lending market. The bank's forecast follows warnings on results from Citigroup and Switzerland's UBS AG (UBS) on Monday.
In commodities trading, gold prices fell, extending a sharp fall seen Tuesday. Oil prices rose 7 cents to $80.12 on the New York Mercantile Exchange.
The dollar was mixed against other major currencies.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 831.2 million shares.
The Russell 2000 index of smaller companies fell 6.95, or 0.84 percent, to 825.02.
Overseas, Japan's Nikkei stock average closed up 0.90 percent, while Hong Kong's Hang Sang index fell 2.55 percent. European markets advanced. Britain's FTSE 100 gained 0.54 percent, Germany's DAX index rose 0.11 percent, and France's CAC-40 gained 0.12 percent.