RTTNews - Stocks finished Wednesday's session moderately lower after disappointing data on the health of the service sector and the labor market generated some selling pressure. The major averages all closed in negative territory, offsetting some of their recent gains.

Prompting some negative sentiment in the markets was a report from the Institute for Supply Management on activity in the service sector in the month of July, which showed that the pace of contraction in the sector unexpectedly accelerated from the previous month.

The ISM said its index of activity in the sector edged down to 46.4 in July from 47.0 in June, with a reading below 50 indicating a contraction in the sector. The decrease came as a surprise to economists, who had expected the index to rise to 48.0.

A separate report released by payroll processor Automatic Data Processing (ADP) showed that private sector employment saw another notable decline in the month of July, although the pace of job losses slowed to its slowest rate since October of 2008.

ADP said non-farm private employment fell by 371,000 jobs in July following a revised decrease of 463,000 jobs in June. Economists had been expecting a decrease of about 350,000 jobs compared to the loss of 473,000 jobs originally reported for the previous month.

Meanwhile, the U.S. Commerce Department revealed that factory orders rose 0.4 percent in June, surprising economists, who had expected orders to drop 0.8 percent.

On the earnings front, traders reacted to a mixed bag of earnings, with Procter & Gamble (PG), Kraft Foods (KFT), Ralph Lauren (RL) and Electronic Arts (ERTS) largely beating bottom line estimates while falling short on the revenue front.

The major averages saw a late session recovery attempt fizzle, leading to a negative finish. The Dow closed down by 39.22 points or 0.4 percent at 9,280.97, the Nasdaq slipped by 18.26 points or 0.9 percent to 1,993.05 and the S&P 500 fell by 2.93 points or 0.3 percent to 1,002.72.

Sector News

Health insurance stocks saw a disappointing outing, with the Morgan Stanley Healthcare Payor Index posting a loss of 3.1 percent on the day. The loss dragged the index further away from the ten-month closing high it set last Thursday.

Tobacco stocks also pulled back by substantial margins, as reflected by the 2 percent retreat by the NYSE Arca Tobacco Index. With the decline, the index moved off of a ten-month closing high set on Tuesday.

Notable weakness was also visible among oil service, trucking and railroad stocks. Biotechnology stocks also fell by a considerable margin, dragging the NYSE Arca Biotechnology Index down 1.8 percent after it ended the previous session at record high.

While some natural gas, telecommunications and pharmaceutical stocks also fell, banking, airline, commercial real estate and housing stocks bucked the day's downtrend.

Notably, the Kbw Banking Sector Index and the NYSE Arca Airline Index surged by 3.5 percent and 4.1 percent, closing at their best levels in roughly seven months.

Dow Components

Shares of Procter & Gamble fell by a notable margin, posting a loss of 2.8 percent after the firm's fourth quarter revenues fell well short of analyst estimates. The retreat dragged the stock further off of the roughly six-month closing high it set late last week.

Further, communications giants AT&T (T) and Verizon (VZ) closed down by 2.1 percent and 1.9 percent, respectively. AT&T backed away from a nearly three-month closing high set last Thursday, while Verizon slid further away from a roughly four-month high set last week.

Caterpillar (CAT), Intel (INTC) and Disney (DIS) also moved off of their recent highs, while some financial stocks limited the loss by the Dow.

Bank of America (BAC) turned in a strong performance on the day, surging up by 6.5 percent. Shares of the financial giant finished the session at their highest level in eight months.

JP Morgan Chase (JPM) and American Express (AXP) were also instrumental in moderating the loss by the blue chip index, posting gains of 3.9 percent and 5.7 percent, respectively.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region finished Wednesday's trading markedly lower. Hong Kong's Hang Seng Index posted a loss 1.5 percent, while Japan's benchmark Nikkei 225 Index ended the session down by 1.2 percent.

The major European markets also closed lower, with the French CAC 40 Index and the U.K.'s FTSE 100 Index both posting losses of 0.5 percent, while the German DAX Index fell by 1.2 percent.

In the bond markets, treasuries closed lower following a volatile session. Subsequently, the yield on the note, which moves opposite of its price, closed up 8.5 basis points at 3.764 percent.

Looking Ahead

On Thursday, traders will have a chance to react to earnings from Cisco (CSCO), Allstate (ALL), Sunoco (SUN) and News Corp. (NWS), which reported after the closing bell.

In addition, the labor market will be in focus once again, with the Labor Department scheduled to release its report on first time unemployment claims for the week ended August 1st. The figure is expected to come in at 580,000 compared to 584,000 reported last week. The report will be released at 8:30 a.m. ET.

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