Stocks slip as growth in services falls short

Stocks fall as growth in service businesses in January lags expectations; job losses slow

The stock market retreated from a two-day rally Wednesday after growth in the nation’s service businesses fell short of expectations.

The Institute for Supply Management said its index of service activity rose to 50.5 in January from a revised 49.8 in December. The January reading was below the level of 51 analysts polled by Thomson Reuters had been expecting. Any number above 50 signals growth.

The weaker activity in service companies chilled enthusiasm about a report that private employers cut fewer jobs than expected last month. The news on jobs from ADP, a payroll company, comes ahead of the government’s January employment report on Friday, which is expected to show employers added 5,000 jobs in the first month of the year but that employment edged up to 10.1 percent from 10 percent.

ADP said employers cut 22,000 non-farm, private jobs last month. That was the best showing since employment started to weaken in February 2008.

A disappointing earnings report and forecast from drug maker Pfizer dragged health care stocks lower.

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Stocks jumped the first two days of this week on encouraging reports about the economy. The advance came after stocks ended January with a loss. The market retreated late last month on concerns that the recovery was faltering and a strong 10-month rally was running out of steam.

Kim Caughey, vice president and investment analyst at Fort Pitt Capital Group in Pittsburgh, said the economic numbers are driving short-term trading but that uncertainty about how lawmakers might rewrite the rules that govern corporations is still hanging over the market. Concerns that tougher laws, including President Barack Obama’s proposal to restrict banks trading activity, would hurt profits helped drive the market lower last month.

“There is tough language in some bills out there that if passed currently could prove chilling,” she said. “I’m betting that that there will be some damage done but not nuclear Armageddon.”

In early afternoon trading, the Dow Jones industrial average fell 55.93, or 0.5 percent, to 10,240.92. The Standard & Poor’s 500 index fell 8.59, or 0.8 percent, to 1,094.73, while the Nasdaq index fell 8.82, or 0.4 percent, to 2,181.24.

The Dow rose 230 points over Monday and Tuesday on positive news about manufacturing and housing. The gain was the biggest back-to-back advance for the Dow in three months.

In other trading Wednesday, bond prices fell and pushed yields higher. The yield on the benchmark 10-year Treasury note rose to 3.68 percent from 3.65 percent late Tuesday.

The dollar rose against other major currencies, while gold fell.

Crude oil rose 10 cents to $77.33 per barrel on the New York Mercantile Exchange.

Pfizer Inc. posted increased fourth-quarter earnings but the results were weaker than analysts had forecast. The stock fell 46 cents, or 2.4 percent, to $18.60.

Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 516.5 million shares compared with 546.7 million shares traded at the same point Tuesday.

The Russell 2000 index of smaller companies fell 5.76, or 0.9 percent, to 608.29.

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Britain’s FTSE 100 fell 0.6 percent, Germany’s DAX index lost 0.7 percent, and France’s CAC-40 fell 0.5 percent. Earlier, Japan’s Nikkei stock average rose 0.3 percent.

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