Stocks Fret Fed

Ian Shepherdson, chief economist with High Frequency Economics, said that investors shouldn't cheer the better-than-expected ISM figure too much.

"Overall, this is still a weak survey, despite the improvement from November, and we expect the downward trend to re-emerge in the first quarter," said Shepherdson. "It does not mean the downtrend in the ISM, in place since the spring of last year, is over."

Also on the economic docket, construction spending dipped 0.2% in November, compared to expectations of a 0.6% decline. October construction spending was revised to a 0.3% downtick from the previously reported 1%.

Wednesday also brought December sales results from automakers. DaimlerChrysler (DCX Quote) said that auto sales dipped 1% for the month, while Ford (F Quote) said vehicle sales fell 12.8%.

Elsewhere, GM (GM Quote) said sales fell 9.6%, while Toyota (TM Quote) reported a 12.3% rise in auto sales.

DaimlerChrysler rose 1% and Toyota was higher by 0.7%. Meanwhile, GM slumped 4.1% and Ford finished unchanged.

Crude futures dropped to their lowest level in 18 months as mild weather in the U.S. is believed to have boosted inventory levels. The Energy Department will release its weekly inventory report on Thursday, a day later than usual. The February oil contract plummeted $2.73 to close at $58.32 a barrel.