Market participants were ready to build on the prior session's rally after receiving some better-than-expected economic news, but a lack of leadership caused stocks to buckle at key levels and finish lower.
Stocks began the session flat -- the tone firmed by an ADP employment report that indicated 522,000 jobs were lost in January. The consensus estimate called for 535,000 job losses, so the better-than-feared report helped quell concern about what may be looming in the government's official jobs report, which is due Friday.
In other economic news, the January ISM Service Index came in at 42.9, which is better than the consensus estimate of 39.0. Though the latest reading reflects continued contraction in the service sector, which encapsulates the majority of economic activity, but the decline has softened for the second straight month.
The pair of better-than-expected reports helped drive the stock market to its session high, where it traded with a 1.6% gain. However, stocks began to trend lower after failing to secure enough support to push through resistance levels.
Participants were also compelled to sell into the advance amid ongoing uncertainty surrounding the highly anticipated bank stimulus plan, which is expected to be unveiled next week. Investors are also anxiously awaiting further developments and details pertinent to the latest economic stimulus plan.
President Obama stated that the government will impose a $500,000 compensation cap on companies receiving TARP funds. Though the plan is likely to win popular support, it would mean the government is meddling in the private sector, while creating a disincentive for financial companies seeking aid.
Financials were one of the six sectors in the S&P 500 to finish the session lower. Financials fell 1.0% after being up nearly 3.4% at their session high.
Consumer discretionary (-2.5%) and consumer staples (-2.6%) stocks underperformed the market for virtually the entire session, weighed down by disappointing earnings from Disney (DIS 19.00, -1.62) and Kraft (KFT 26.11, -2.63). Kraft also disappointed by lowering its outlook. Both companies weighed on the Dow.
Given such concerns, many investors remain jittery and continue turning to gold. Gold rebounded from two consecutive down sessions to close at $902.80 per ounce, up 1.2%. Gold is a bit off its six-month high of $930.30 per ounce. Still, the strength in precious metals helped the materials sector outperform the broader market, finishing 1.5% higher.
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