* Tesla shares plunge following results after the bell
* U.S. service sector growth quickens in Oct -ISM
* Indexes: Dow off 0.1 pct; S&P down 0.3 pct; Nasdaq up 0.1 pct
By Angela Moon
NEW YORK, Nov 5 (Reuters) - The Dow and the S&P 500 ended lower on Tuesday following two sessions of gains as investors weighed the implications of strong economic data for the path of monetary policy over the next several months.
After the closing bell, Tesla Motors Inc reported a stronger-than-expected third-quarter profit, but offered a fourth-quarter outlook that fell short of Wall Street estimates. The company’s stock fell about 11 percent.
Among top declining sectors were energy and telecoms which had been market leaders in the previous day. The S&P energy sector index fell 0.8 percent and the telecom service sector index lost 1.9 percent.
“Despite the bounce at the beginning of this week, equity markets likely need further consolidation, pullback before a more meaningful upside rally can develop given short-term indicators remain overbought,” said Robert Sluymer, analyst at RBC Capital Markets in New York.
The Institute for Supply Management said its services index rose a point to 55.4 in October despite a partial government shutdown during the first half of the month. The reading came in higher than September’s 54.4, handily beating expectations for a slight deceleration.
Investors are scrambling to measure the impact of strong data on the Federal Reserve’s decision to keep pumping $85 billion monthly into the economy through bond purchases. This stimulus has been instrumental in spurring a rally that has set the S&P 500 on course toward its best year in a decade.
The Fed has stressed its decision to change the level of stimulus is data-dependent. Once the economy is strong enough, it has said it may begin to withdraw its massive bond purchases.
The Dow Jones industrial average was down 20.90 points, or 0.13 percent, at 15,618.22. The Standard & Poor’s 500 Index was down 4.96 points, or 0.28 percent, at 1,762.97. The Nasdaq Composite Index was up 3.27 points, or 0.08 percent, at 3,939.86.
On the New York Stock Exchange, declining stocks beat advancing ones by 2,045 to 956 while on the Nasdaq, decliners beat advancers by 1,473 to 1,076.
According to Thomson Reuters data, of 404 companies in the S&P 500 that have reported results through Tuesday morning, 69.6 percent have topped Wall Street’s expectations, above the long-term average of 63 percent. However, just 53.3 percent beat revenue forecasts, below the 61 percent average since 2002.
Michael Kors Holdings gained 5.8 percent to $79.13 after the luxury apparel retailer reported a better-than-expected 40 percent jump in quarterly revenue.
GT Advanced Technologies jumped more than 20 percent to $10.10 after it said Apple will open a manufacturing facility in Arizona in partnership with the mineral crystal specialist to make sapphire materials for Apple’s electronic devices.
CVS Caremark advanced 2 percent to $63.22 after the drugstore operator and pharmacy benefits manager posted a higher-than-expected profit and raised its forecast.
Tenet Healthcare was the worst performer on the S&P 500, down 8.8 percent to $44 after its third-quarter net income slid from a year earlier.