Stocks fall on job jitters

Wall Street retreated Wednesday as investors fretted that the still struggling labor market would weigh on recovery efforts.

More than an hour into the session, the Dow Jones industrial average (INDU) lost 92 points, or 1%; the Standard & Poor's 500 (SPX) shaved 9 points or, 0.9%; and the tech-heavy Nasdaq composite (COMP) gave up 21 points, or 1.1%.

The retreat reverses Wall Street's recent run, which has been spurred by a better-than-expected second-quarter earnings period and signs of stabilization. July was the strongest July for the Dow and S&P 500 in two decades.

On Tuesday, stocks ended higher, with the Dow and S&P hitting new nine-month highs. This was supported by a stronger-than-anticipated read on the housing market: The National Association of Realtors said the pending home sales index rose 3.6% in June.

Job market: Two reports on Wednesday, however, showed that the labor market continues to face challenges and that recovery in the sector will be slow.

Paycheck processor Automatic Data Processing (ADP) said private-sector employers cut 371,000 jobs in July, the smallest monthly total since October. Although the pace of job cuts is slowing, the number was higher than expected.

Earlier this morning, outplacement firm Challenger said companies' planned job cuts rose 31% in July, indicating problems in the employment sector are far from over.

The reports come ahead of the U.S. Labor Department's closely watched monthly jobs report, which will be released on Friday.

The Labor Department is expected to show that the economy shed 328,000 jobs in July, less than the 467,000 reported for June, according to a consensus estimate of economists compiled by Briefing.com. The unemployment rate is predicted to rise to 9.6% from 9.5%.

Economy: The morning's economic data was mixed.

One report showed that the U.S. services sector contracted more than expected in July. The Institute for Supply Management's services index fell to 46.4, -- down from 47 in June -- and shy of economists' forecast of 48. Any reading under 50 indicates the sector is contracting.

Meanwhile, a report from the Commerce Department showed a surprise uptick in demand for U.S.-made manufactured goods. Factory orders increased 0.4% in June, while economists were bracing for a decline of 0.8% according to analysts' consensus on Briefing.com.

Earnings: Consumer goods firm Procter & Gamble (PG, Fortune 500) reported profits slightly higher than expected, although revenue declined as consumers moved away from its high-end product lines.

Other companies to watch include Kraft Foods (KFT, Fortune 500), which reported an 11% jump in profits after U.S. markets closed Tuesday.

Oil and gold: U.S. light crude oil for September delivery fell 98 cents to at $70.44 a barrel.

COMEX gold for December delivery fell $2.70 to $967 an ounce.
0:00 /2:41The impact of govt. assistance

Bonds: Treasury prices were nearly unchanged, with the yield on the benchmark 10-year note down slightly to 3.67%. Treasury prices and yields move in opposite directions.

Other markets: In global trading, Asian stocks fell as investors paused for breath. Major European markets were mixed as investors digested another round of bank earnings.

In currency trading, the dollar gained versus the euro and the Japanese yen.

Market breadth was negative. On the New York Stock Exchange, decliners beat out more than two to one on a volume of 324 million shares. On the Nasdaq, decliners beat out advancers almost three to one on a volume of 705 million.