NEW YORK Stocks fell sharply on Wednesday as the latest economic data continued a trend of indicators pointing to anemic growth while bellwether companies disappointed on revenue.
Equities briefly pared their losses after the Federal Reserve said it would continue its policies of stimulating the economy, though the decision was expected, and shares subsequently slid back to their lows of the day.
About 70 percent of stocks traded on the New York Stock Exchange closed lower while three-fourths of Nasdaq-listed shares ended in negative territory.
The Fed said recent budget tightening in Washington could be a risk to growth, even as it noted some improvement in the labor market.
Equities have performed well of late, with the S&P 500 hitting both intraday and closing record highs on Tuesday, though a trend of discouraging data indicated that the Fed wouldn't ease up on its accommodative monetary policy of quantitative easing.
"That the Fed won't end QE any time soon is positive for stocks in the near term, but the data we've seen is creating a lot of angst for investors," said Mike Gibbs, co-head of the equity advisory group at Raymond James in Memphis, Tennessee.
U.S. private-sector employers added 119,000 jobs in April, well below economists' expectations, according to a report from payrolls processor ADP. A separate report from the Institute for Supply Management showed the U.S. manufacturing sector expanded only modestly in April.
Adding to concerns, growth in China's factory sector unexpectedly slowed last month as new export orders fell, raising fresh doubts about the world's second-largest economy after a disappointing first quarter.
Materials and energy stocks led declines as expectations of slower growth pushed basic materials prices lower. An index of commodities .TRJCRB fell 1.7 percent while the S&P energy index .SPNY slid 1.6 percent and the S&P materials index .SPLRCM lost 1.8 percent. Copper prices fell 3.6 percent, the most in a day since early April 2012.
Exxon Mobil Corp (XOM.N) fell 1.7 percent to $87.51 while U.S. shares of mining giant Rio Tinto (RIO.N) shed 2.7 percent to $44.82.
The S&P 500 has recently ended sessions much stronger than its early lows as traders bought equities on signs of weakness.
"We're a bit overextended, which is leading to some profit taking," said Gibbs, who helps oversee about $400 billion. "But relative to historical measure, we're not in an expensive market, and we would view declines as buying opportunities."
The Dow Jones industrial average .DJI lost 138.85 points, or 0.94 percent, to 14,700.95 at the close. The Standard & Poor's 500 Index .SPX dropped 14.87 points, or 0.93 percent, to finish at 1,582.70. The Nasdaq Composite Index .IXIC slid 29.66 points, or 0.89 percent, to close at 3,299.13.
The S&P 500 is up 11 percent so far this year. April marked the index's sixth consecutive month of gains.
Disappointing corporate results also weighed on the market. Both MasterCard Inc (MA.N) and Merck & Co (MRK.N) posted revenue that fell short of expectations, continuing a trend of prominent companies struggling to increase sales.
MasterCard dropped 2.4 percent to $539.82. Merck fell 2.8 percent to $45.69 and weighed on the Dow. Visa Inc (V.N), a competitor of MasterCard, fell 1.5 percent to $166.02.
Facebook Inc (FB.O) rose 2.1 percent to $28 in after-hours trading after the company reported first-quarter revenue that beat expectations. In regular trading, Facebook shares slipped 1.2 percent to $27.43.
Of the 342 companies in the S&P 500 that have reported earnings so far this season, 68.7 percent have beaten expectations and 43.2 percent have reported revenue above forecasts. Over the past four quarters, 67 percent have beaten earnings forecasts and 52 percent have beaten revenue expectations.
Shares of wireless carrier T-Mobile US TMUS.N rose 6 percent to $16.52 in its debut on the New York Stock Exchange. The company was created by the merger of MetroPCS Communications and Deutsche Telekom AG's (DTEGn.DE) U.S. unit T-Mobile USA.
About 6.53 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, above the daily average so far this year of about 6.36 billion shares.
(Editing by Jan Paschal)