Stocks mostly fell on Wednesday as Pfizer's disappointing outlook weighed on the health sector, and President Obama's pledge to complete banking and healthcare reform revived fears of increased regulation.
President Barack Obama reiterated his commitment to overhaul the healthcare system and impose stricter regulatory reforms on Wall Street, underscoring the political risk that has driven U.S. stocks lower in recent weeks.
Political factors are definitely putting a cloud over the market again, and (this) is probably going to put a lid on a rally for awhile until we get some clarity on these reforms, said Scott Marcouiller, senior equity market strategist at Wells Fargo in St. Louis.
Pfizer Inc fell 2.3 percent to close at $18.62, leading a broad decline in several health-related sectors after the world's biggest drugmaker's quarterly earnings missed estimates and the company forecast profits below expectations. .
Trucking companies' shares were hit after Ryder System Inc and C.H. Robinson Wrldwide Inc reported weaker-than-expected profits.
Ryder tumbled 7.7 percent to end at $34.45, and C.H. Robinson lost 6.8 percent to close at $53.54. The Dow Jones transportation average <.DJT> lost 1.4 percent.
The Dow Jones industrial average <.DJI> slipped 26.30 points, or 0.26 percent, to end at 10,270.55. The Standard & Poor's 500 Index <.SPX> fell 6.04 points, or 0.55 percent, to end at 1,097.28. But the Nasdaq Composite Index <.IXIC> inched up just 0.85 of a point, or 0.04 percent, to close at 2,190.91.
Expectations of more government scrutiny sparked fears that corporate profits would be crimped, driving the S&P 500 down nearly 7 percent in the second half of January. But markets had recovered with a two-day rally that began this week. The Nasdaq ended flat, but outperformed other indexes, helped by major tech companies, including Apple Inc and Google . Shares of Apple rose 1.7 percent to close at $199.23 and Google gained 1.8 percent to $540.82.
Economic data also renewed concerns about lackluster growth. The Institute for Supply Management's index showed the U.S. services sector grew less than expected in January, overshadowing an ADP Employer Services report that said job losses in the private sector slowed in January.
Banking stocks dropped as concerns resurfaced about the administration's intent to limit trading activities at some big banks. Morgan Stanley , which has a large trading arm, fell 0.6 percent to $27.89. The KBW bank index <.BKX> slid 2.4 percent.
Health insurers' stocks also fell, with Cigna Corp down 1.4 percent at $34.76, and UnitedHealth Group Inc off 2.1 percent at $33.32.
The Morgan Stanley Healthcare Payor Index <.HMO> fell 1.6 percent.
MetLife Inc shares slid 4.3 percent to $34.80 as the biggest U.S. life insurer faced a possible credit downgrade, a day after the company confirmed it was in talks, but it had not reached a deal to buy a unit of American International Group Inc .
The New York-traded shares of Toyota Motor <7203.T> slid 6 percent to close at $73.49 on the NYSE after the Obama administration stepped up the pressure to address a range of safety issues, deepening the crisis for the world's largest automaker following its massive January recall of cars and trucks due to faulty accelerator pedals.
Total volume of 8.09 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of slightly more than 3 to 2, while on the Nasdaq, about three stocks fell for every two that rose.
(Reporting by Angela Moon; Editing by Jan Paschal)