Wall Street extended its pullback Wednesday as investors, retrenching from an optimistic stance early in the week, waited to see how well corporate earnings and the job market have held up in an uneven economy.
The market showed little conviction for a second day as economic readings offered few surprises and as investors looked for signs — possibly from the September employment report due Friday — of whether the market's sharp rebound from mid-August lows has been warranted.
The decline Wednesday preceded earnings reports from the recently completed third quarter and Friday's jobs number, which can signal whether consumer spending will continue apace. Wall Street had little reaction to a report that the nation's service sector, whose industries account for 80 percent of U.S. economic activity, showed a decline last month.
Homebuilder stocks rose amid a sense among some analysts that the housing market might have hit bottom. Meanwhile, semiconductor shares mostly lost ground on concerns about pricing pressures.
"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."
According to preliminary calculations, the Dow Jones industrial average fell 79.26, or 0.56 percent, to 13,968.05. The Dow moved back above 14,000 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 7.04, or 0.46 percent, to 1,539.59, and the Nasdaq composite index fell 17.68, or 0.64 percent, to 2,729.43.
Bond prices slipped Wednesday after the economic readings and as stocks came off their lows. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.54 percent from 4.53 percent late Tuesday.
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 $1.10, or 4.5 percent, to $25.82, while Pulte Homes Inc. rose 46 cents, or 3 percent, to $15.96.
Chip stocks slid amid unease over pricing competition. Micron Technology Inc. fell $1.05, or 8.9 percent, to $10.74 after issuing a forecast that disappointed Wall Street. Intel Corp. fell 57 cents, or 2.2 percent, to $25.81 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 commodities trading, gold prices fell, extending a sharp fall seen Tuesday. Oil prices fell for the fourth session, settling down 8 cents at $79.97 per barrel on the New York Mercantile Exchange, after the government reported an unexpected increase in crude oil inventories.
The dollar rose against other major currencies.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where volume came to 1.25 billion shares compared with 1.27 billion traded Tuesday.
The Russell 2000 index of smaller companies fell 5.82, or 0.70 percent, to 826.15.