* US ISM non-manufacturing index 56.0 in March
* US private sector adds 209,000 jobs in March-ADP
* Spanish debt yields rise as deficit problems mount
* Dow off 0.9 pct, S&P off 1 pct, Nasdaq off 1.6 pct
By Edward Krudy
NEW YORK, April 4 U.S. stocks fell for a second day on Wednesday as investors faced the prospect of no new monetary stimulus from the Federal Reserve and as a poorly received bond auction in Spain suggested the effects of earlier European funding operations may be waning.
Selling was broad as indexes tracking nine of the 10 S&P 500 sectors were lower, with energy, financial and technology stocks among the worst performers. The benchmark S&P 500 index has fallen in eight of the past 12 sessions. T he Nasdaq was on track for its worst daily percentage drop since Dec. 8.
Spanish borrowing costs jumped at bond auctions, raising concerns that the rally in troubled peripheral sovereign debt sparked by the European Central Bank's two Long-Term Refinancing Operations may be coming to an end.
Stocks continued to feel the fallout from minutes from the Federal Reserve's latest meeting, published on Tuesday. They showed the Fed's policy-setting Federal Open Market Committee was moving away from introducing more monetary stimulus in a surprise turn for the market.
"The major support for the economy and for the financial markets over the past two years has been stimulus, and without it it's still a question whether these economies can make it on their own," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville.
The Dow Jones industrial average dropped 117.12 points, or 0.89 percent, to 13,082.43. The Standard & Poor's 500 Index fell 13.97 points, or 0.99 percent, to 1,399.41. The Nasdaq Composite Index lost 50.75 points, or 1.63 percent, to 3,062.82.
Signs that the U.S. economy was on the mend in the first quarter have helped markets rally this year. But there is now a growing feeling among investors that a least some of that improvement may have been due to the mild winter. After the S&P 500's near 30-percent run since early October, investors are turning cautious ahead of second-quarter economic data.
"The economy now has to prove itself. Were those numbers we saw in the first quarter due to weather conditions or were they real? It's going to take five or six weeks to sort this out," said Bittles.
Private-sector jobs data, released by payrolls processor ADP, showed U.S. employers added 209,000 jobs in March, suggesting the labor market was continuing to strengthen, but it was not enough to boost investor sentiment.
Some investors caution about reading too much into the weakness, saying that the market needs a reason to consolidate after its big run and that the fundamental picture, while not inspiring, is at least solid.
"The market has been looking for a reason to consolidate, take a rest, call it what you what will, and a large part of that is what is happening today," said Cummins Catherwood, managing director of Boenning & Scattergood in West Conshohocken, Pennsylvania.
Moody's downgraded the ratings of conglomerate General Electric Co and its finance unit, GE Capital, each by a notch, saying there were "material risks" associated with GE Capital's funding model. The stock, a Dow component, fell 1 percent to $19.76.
McDonald's Corp lost 1.8 percent to $97.59 after Goldman Sachs removed it from Goldman's "conviction buy" list and cut its price target on shares of the world's largest fast-food restaurant chain to $110.
Semiconductors weighed on the Nasdaq as SanDisk Corp dropped 10.4 percent to $44.83 after the flash-memory maker warned that its revenue and margins are hurting from weak demand from mobile phone manufacturers as well as from a glut in supply that has led to lower prices.
The PHLX semiconductor index lost 2.3 percent.