Worse-than-expected Economic Data Thwart Rally

In the last hour of trading, however, some traders bought back into the stock market to take advantage of reduced prices, said Ryan Larson, senior equity trader at Voyageur Asset Management. It's a tactic known as bargain hunting, or "buying the dips," and the move signalled that many market participants still believe the rally has legs.

"At some point, it's hard to fight the trend, and the trend over the last couple of months has been up," Larson said. "People don't want to be left out."

The Dow fell 65.63, or 0.8 percent, to 8,675.24. The Standard & Poor's 500 index fell 12.98, or 1.4 percent, to 931.76. The Nasdaq composite index fell 10.88, or 0.6 percent, to 1,825.92.

The S&P 500 index and Nasdaq pulled back from their highest levels so far this year, reached Tuesday. Both the S&P and Nasdaq are still up for the year, but the Dow has yet to break into positive territory for 2009. It got within 35 points, or 0.4 percent, of that break-even point on Tuesday.

There were more than twice as many declining stocks as advancing stocks on the New York Stock Exchange Wednesday, where volume amounted to 1.3 billion shares, down from 1.4 billion a day earlier.