Wall Street rally ends, caution before jobs report

Traders work on the floor of the New York Stock Exchange, July 3, 2012.

NEW YORK (Reuters) - Stocks edged down on Thursday as economic stimulus measures by major central banks failed to excite investors before a U.S. jobs report expected to show tepid growth.

After the S&P 500 index's strongest three-day run this year, investors stepped back, leaving the broad index and the Dow modestly lower and the Nasdaq essentially flat.

Trading volume was light after the July 4th U.S. market holiday and before the government's June nonfarm payrolls report on Friday.

The data is expected to show Europe's debt crisis is weighing heavily on the U.S. economy. Analysts expect the economy added 90,000 jobs last month, a level that won't make much of a dent in the grim unemployment situation.

"We're stabilizing today, but bigger moves would've been a surprise with payrolls coming up tomorrow since there are still concerns about the economy as a whole," said Rick Fier, director of trading at Conifer Securities in New York, which manages about $12 billion in assets.

Financial stocks weighed on Wall Street, with Dow component JPMorgan Chase (JPM.N) falling 4.2 percent to $34.38 and Bank of America Corp (BAC.N) off 3 percent at $7.82.

The S&P Financial index .GSPF and the KBW Banks index .BKX fell about 1.5 percent. Financial shares have often taken the brunt of selling during the European crisis, though they experienced a good run during the recent rally.

Wall Street was little impressed by the actions in China, Europe and Britain to loosen monetary policy, which sent the euro lower against the U.S. dollar.

Stocks also derived little benefit from reports on Thursday showing hopeful signs about U.S. hiring by private employers. Markets give more weight to the broader monthly report from the U.S. Labor Department.

The Dow Jones industrial average .DJI was down 47.15 points, or 0.36 percent, at 12,896.67. The Standard & Poor's 500 Index .SPX was down 6.44 points, or 0.47 percent, at 1,367.58. The Nasdaq Composite Index .IXIC was up 0.04 point at 2,976.12.

Losses in the Nasdaq were limited by Apple Inc (AAPL.O), which rose 1.8 percent to $609.94, and Google Inc (GOOG.O), up 1.4 percent at $595.92.

News that the U.S. service sector slowed to a 2 1/2-year low in June was in line with investor fears that the euro zone debt crisis was sapping global growth. Traders booked gains from the strong run that began Friday and extended through Tuesday.

Economists do not expect the payrolls report for June to dispel concerns that the recovery is losing steam. Europe's debt debacle has sapped the strength of the global economy and some worry Thursday's central bank actions indicate they are fighting a losing battle.

"This action shows central banks getting in line for if a default happens," Fier said. "It has taken people off the disaster trade but also pressured the euro, making it hard for the market to move higher in any meaningful way."

Meanwhile, Spain's difficulties increased, with its 10-year borrowing costs rising despite the euro zone's latest plan to help the region's troubled economies.

Costco Wholesale Corp (COST.O), Macy's Inc (M.N), Kohl's Corp (KSS.N) and Target Corp (TGT.N) were among the retail chains that reported disappointing June sales at stores open at least a year.

Costco shares were down 0.4 percent at $94 and Target fell 1.1 percent to $57.15.

Volume was light, with about 5.19 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.

About 54 percent of companies traded on the New York Stock Exchange closed in negative territory while on the Nasdaq about 52 percent of shares closed lower.

(Editing by Kenneth Barry)