NEW YORK The S&P 500 and the Dow edged lower on Wednesday as data showed that private sector hiring fell far more than expected in April, sparking concerns that Friday's U.S. jobs report will also disappoint investors.
Private employers added 119,000 jobs in April, well short of the 177,000 expected, the ADP report showed. That sparked market rumors that Friday's payrolls data will show the economy added just 125,000 to 150,000 jobs last month, well below a Reuters consensus forecast of 170,000.
"If fewer and fewer people are participating in this recovery it suggests underlying weakness that we have to address, and so far policymakers' answers have been 'easy credit' - I think we need to go beyond that," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
The report came on the heels of more glum news from Europe. Euro zone factory activity contracted again last month, with the purchasing managers index, seen as a measure of how the economy will fare, falling to its lowest level since June 2009.
Energy was the worst performer among the 10 major S&P sectors, sapped by a 14.6 percent drop in Chesapeake Energy Corp (CHK.N) to $16.74. The S&P energy index .GSPE lost 1.6 percent.
Chesapeake was the most actively traded stock on the New York Stock Exchange, hit by disappointing quarterly results and as Reuters reported a new disclosure about business interests of the company's chairman.
The Dow Jones industrial average .DJI dropped 10.75 points, or 0.08 percent, to 13,268.57. The Standard & Poor's 500 Index .SPX fell 3.52 points, or 0.25 percent, to 1,402.30. The Nasdaq Composite Index .IXIC gained 9.41 points, or 0.31 percent, to 3,059.85.
After the bell, shares in Green Mountain Coffee Roasters Inc GMCR.O crashed 40 percent. The company slashed its full-year sales forecast after demand for its K-Cup coffee refills fell well short of Wall Street expectations.
The Dow on Tuesday hit a four-year high on strong manufacturing data, while the S&P 500 has struggled to make a meaningful rise above the 1,400 resistance level. Still, the S&P is up more than 11 percent for the year.
Adding to the negative tone on Wednesday, new orders for U.S. factory goods in March recorded their biggest decline in three years, even though they slightly topped forecasts.
"What the market needs is a sign that the economy is not getting worse. Yes, the growth is slow, but it's still there," said Ralph Edwards, director of derivatives sales and trading at ITG in New York.
Helping the Nasdaq, Intel Corp's shares (INTC.O) continued to march higher, hitting their highest level since 2004. Traders see continued flows into large-cap technology stocks as a bullish sign. Many investors consider Intel, which closed up 0.8 percent at $29.18, to be undervalued.
For Chesapeake Energy, it was the company's busiest trading day ever, with 145.3 million shares changing hands across all exchanges.
Chesapeake reported quarterly earnings that disappointed investors, and analysts pointed to higher-than-expected output of low-priced natural gas, even as the company sought to cut production.
Also, Reuters reported that Chesapeake's chairman and chief executive, Aubrey McClendon, ran a $200 million hedge fund on the side that traded in the same commodities Chesapeake produces. The company said Tuesday it would replace McClendon as chairman.
Home builders as measured by the Dow Jones homebuilder index .DJUSHB rose to nearly four-year highs. Traders cited a spat between two democratic congressmen and the Federal Housing Finance Agency on forgiving mortgage principal as a sign that calls for such measures could gain traction.
Shares in PulteGroup Inc (PHM.N), the No. 2 U.S. homebuilder, rose 2.4 percent to $10.27.
Among other companies reporting results, CVS Caremark Corp (CVS.N) rose 2.7 percent to $45.92 after the drugstore operator and pharmacy benefits manager posted a sharp rise in first-quarter sales and raised its profit forecast.
American Eagle Outfitters Inc (AEO.N) jumped 16.8 percent to $20.90 as the teen clothing retailer raised its profit forecast.
Of the 350 S&P 500 companies reporting results through Wednesday morning, 70 percent have topped analysts' estimates, according to Thomson Reuters data.
Women's clothing retailer Ascena Retail Group Inc (ASNA.O) will buy Charming Shoppes Inc (CHRS.O) in an all-cash deal. Charming surged 23.9 percent to $7.31 as the most actively traded Nasdaq stock, and Ascena gained 10.4 percent to $21.06.
Volume was 6.4 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE Amex, below the daily average of around 6.76 billion.
Declines outpaced advances by a ratio of about 3 to 2 on the NYSE. But on the Nasdaq the figure was approximately reversed.
(Editing by Leslie Adler and Dan Grebler)