By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks tumbled on Wednesday for a
second session as data on U.S. private-sector job growth darkened
views of the monthly nonfarm-payrolls report to be released in two
days.
"More attention is being brought to the economic data, so
everyone can play Nostradamus and guess what the Fed's next move
will be," Mark Luschini, chief investment strategist at Janney
Montgomery Scott, said of ongoing guessing as to when the Federal
Reserve would begin tapering its $85 billion in monthly bond
purchases.
Stock indexes remained deeply under water after the release of
the Fed's so-called Beige Book, which found the U.S. economy to be
still growing at a "modest to moderate" pace.
"In the past few weeks, good news is bad, and bad news is bad,
as we started to see talk of the tapering come through," said Sean
Lynch, global investment strategist for Wells Fargo Private
Bank.
In its worst session in more than a month, the Dow Jones
Industrial Average (DJI) lost 216.95 points to 14,960.59, with
Intel Corp. (INTC) pacing declines that included all of its 30
components.
The S&P 500 index (SPX) declined 22.48 points to 1,608.90,
with materials and financials leading losses that included all of
its 10 major industry groups. Read a blog: S&P 500 sinks 4%
from May highs
A Dell Inc. (DELL) board panel found Carl Icahn's takeover bid
to be short due to an estimated $3.9 billion funding deficit
necessary to pay a proposed dividend and operate the PC maker.
Apple Inc. (AAPL) shares shed 0.9% after the International Trade
Commission found the iPhone maker infringed on a Samsung
Electronics Co. patent, with Apple facing a possible import ban on
some products.
General Motors Co. (GM.XX) fell 2.7% after the U.S. Treasury
said it would sell 30 million more shares of the car manufacturer's
common stock.
The Nasdaq Composite (RIXF) fell 43.78 points to 3,401.48.
For every share rising, four fell on the New York Stock
Exchange, where 738 million shares traded. Composite volume
approached 3.6 billion.
Gold(GCQ3) and oil (CLN3) prices rose; the U.S. dollar(DXY)
declined and the yield on the 10-year Treasury note
(TICKER:10_YEAR) used in determining mortgage rates and other
consumer loans fell to 2.087%.
U.S. companies created 135,000 jobs in May, according to ADP
Employer Services.
"The market is in the midst of a bit of a correction, so the
bias is lower anyway. But with the ADP report being as
underwhelming as it was, there is an increasing loss of enthusiasm
for equities at the moment," said Janney Montgomery Scott's
Luschini.
Revised government figures showed productivity rising 0.5% in
the January-to-March period, and hourly compensation falling 3.8%.
Wednesday's data came ahead of Friday's nonfarm-payrolls report,
and added credence to the view that a soft labor market would
extend the time frame before the Federal Reserve begins tapering
its bond purchases.
"The market is playing wait-and-see with Friday's numbers, but
certainly the ADP number that came out showed there is probably
moderate downside risk to that May employment number," said Lynch
at Wells Fargo Private Bank.
Another report, this one from the Institute for Supply
Management, found a slight acceleration in service-sector activity
in May.
Also Wednesday, the Commerce Department reported orders for
goods made by U.S. factories rose 1% in April.
A 20-Tuesday-long win streak for the Dow industrials was
derailed, with the index falling 76.49 points, or 0.5%, to end at
15,177.54. Fears over when the Federal Reserve will begin to pull
back on its bond-buying program weighed on sentiment.
On Tuesday, Fed Bank of Kansas City President Esther George
advocated for the Fed to pare back its bond-buying program, and
Dallas Fed President Richard Fisher stepped up his criticism of the
Fed's easy-money program.
Strategists at Credit Suisse said Wednesday that they see 15%
more upside for stocks. They lifted their S&P 500 year-end
target to 1,730 from 1,640 and introduced a new target of 1,900 for
the end of 2014. The strategists gave five reasons for staying
overweight in equities, including an overly pessimistic view on
when the Fed will curb its bond-buying program. (Read more on
Credit Suisse's equity call:
http://blogs.marketwatch.com/thetell/2013/06/05/credit-suisse-another-15-upside-for-stocks-and-get-over-tapering-already/.)
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