Stocks End on Mixed Note

Stocks meandered Wednesday as discouraging employment data gave investors pause following the previous session's massive rally. Gregg Greenberg has The Real Story.
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NEW YORK (

TheStreet

) -- Stocks meandered Wednesday as discouraging employment data gave investors pause following the previous session's massive rally.

The

Dow Jones Industrial Average

managed to push 23 points, or 0.2% higher, to 10,967 after struggling for direction during most of the trading session. The

S&P 500

ended flat at 1,159, while the

Nasdaq

shed 19 points, or 0.8%, to finish at 2,380.

General Electric

(GE) - Get Report

,

Alcoa

(AA) - Get Report

and

Cisco

(CSCO) - Get Report

were the strongest performers on the Dow, while

AT&T

(T) - Get Report

,

Bank of America

(BAC) - Get Report

and

American Express

(AXP) - Get Report

underperformed.

Stocks rallied Tuesday to their highest levels since May on strong data from the services sector and bolstered expectations for additional quantitative easing from the

Federal Reserve

.

But the euphoria died down on Wednesday following a pair of weak reads on the job market.

Planned layoffs rose slightly in September, according to a report by global outplacement consultancy Challenger, Gray & Christmas. During the month, employers announced plans to cut 37,151 jobs, representing a 7% increase from planned reductions in August.

The

private sector unexpectedly shed 39,000 payrolls in September, after adding 10,000 in August, according to Automatic Data Processing's employment report. The drop disappointed analysts who had been looking for an increase of 18,000 payrolls.

"A major drain on the ADP employment total for September was construction employment, which dropped by 28,000 workers for the month; not surprising given the post-tax-credit slump in new residential construction," said PNC Chief Economist Stuart Hoffman, adding that the financial services sector also had a weak month, losing 13,000 jobs.

Jim Baird, partner and chief investment strategist for Plante Moran Financial Advisors, said the ADP report shows that the weak pace of job creation continues to pose a threat to the recovery.

"Personal income levels in August were buoyed by the extension of unemployment benefits which had otherwise expired. Take that away, and inflation-adjusted personal income growth has been virtually non-existent in the past three months," Baird said, adding that high unemployment, beleaguered consumers and sluggish economic growth is a challenging combination.

"Each of these feed off the other, creating the potential of a negative feedback loop that could be difficult to break."

However, hopes that the poor jobs report would push the Fed towards further easing, helped to stave off steep declines.

Expectations of further action from the Fed, pressured the dollar and pushed up treasuries. The dollar index was down by 0.5%.

Separately, U.S. Treasury Secretary Timothy Geithner took aim at China's currency when he warned Wednesday that large economies with undervalued exchange rates risk creating a dynamic that could result in asset bubbles in emerging economies or dismal consumption growth, according to a

Wall Street Journal

report.

In a further blow to the economic outlook, the International Monetary Fund now anticipates that the U.S. economy will grow 2.6% in 2010 and 2.3% in 2011, according to the IMF's World Economic Outlook, which was released on Wednesday. Those estimates were reduced from July's calls for growth of 3.3% in 2010 and 2.9% in 2011.

Goldman Sachs also issued a report predicting that the economy would be "fairly bad" with growth rates ranging at 1-2% for the economy and unemployment inching up to 10%.

The bleak economic outlook drove the 10-year note higher by 21/32, diluting the yield to a new low of 2.398%.

In commodity news, the Energy Information Administration said crude oil inventories gained 3.1 million barrels in the week ended Oct. 1, disappointing estimates for a decline of 1.3 million barrels, though falling short of the 4.44million-barrel buildup that the American Petroleum Institute reported late Tuesday. Gasoline supplies and distillates stockpiles both declined, by 2.7 million barrels and 1.1 million barrels, respectively. Analysts, according to a Platts poll, had been looking for an additional 700,000 barrels in gasoline stocks and a drop of 900,000 barrels to distillates.

Following the EIA report, the November

crude oil contract was gaining 41 cents to trade at $83.23 a barrel.

Elsewhere in commodity markets,

gold leaped higher with the December gold contract settling up $7.4 to $1,347.4 an ounce.

In stock news, shares of

Ambac Financial

(ABK)

jumped 32% to 77 cents after the company agreed to withdraw more than $6 billion in claims against

Lehman Brothers

, settling its dispute over derivative transactions with the bankrupt bank. Lehman would release Amabc's bond insurance arms from demands for unspecified payments and from liabilities under derivative transactions insured by Ambac.

Monsanto's

(MON)

stock edged higher by 0.5% to $48.78 after the agricultural products company reported a wider-than-expected loss in the fourth quarter but guided for a year-over-year per-share earnings increase of 13% to 17% in fiscal 2011.

Shares of

Costco Wholesale

(COST) - Get Report

rose 1.1% to $65.40 despite fourth-quarter earnings that rose nearly 16% and topped expectations. Sales rose 8% to $23.59 billion but fell short of revenue estimates for $24.23 billion.

According to a

Reuters

report,

Hewlett-Packard

(HPQ) - Get Report

plans to launch smartphones based on

Palm's

WebOS early next year. HP's stock was off by 0.2% to $40.74.

Wells Fargo

(WFC) - Get Report

has agreed to settle claims by eight states that alleged it sold deceptive mortgages for $24 million. The stock was flat at $26.30.

Shares of

Verizon

(VZ) - Get Report

were higher by 0.8% to $33.40 on a

Wall Street Journal

report that said

Apple

(AAPL) - Get Report

plans to produce an new iPhone by the end of 2010 that will allow Verizon to sell the smart phone next year. Shares of

AT&T

(T) - Get Report

fell harder by 1.1% on the news. Apple was up by 0.1% at $289.19.

3M

(MMM) - Get Report

is allowed to move forward on its $943 million purchase of fingerprint ID company

Cogent

(COGT)

after a judge refused Cogent shareholders' requests for an injunction to prevent the deal in favor of a late offer from NEC, according to

Bloomberg

. 3M's stock rose 1.1% to $89.89 while Cogent's stock was lower by 1.5% to $10.57.

Johnson & Johnson

(JNJ) - Get Report

announced that Dutch biotech company

Crucell

(CRXL)

agreed to be acquired for roughly $2.43 billion. Shares of Johnson & Johnson gained 0.6% to $63.21, while Crucell's stock rose 1.1% to $34.20.

Meanwhile,

General Electric

(GE) - Get Report

said U.K. oilfield services company

Wellstream

rejected its offer of 750 pence a share, or 755 million pounds ($1.2 billion), according to a

Bloomberg

estimate. GE's stock surged 2.4% to $16.90.

Late Tuesday,

Allied Irish Bank

(AIB)

announced its decision to sell its $2.2 billion stake in

M&T Bank

(MTB) - Get Report

through a public offering, a move that puts an end to any deal speculation, according to an analyst. Allied Irish's stock declined 4.5% to $1.27 and M&T's stock was losing 5% to $78.92.

Overseas, Hong Kong's Hang Seng gained 1.1% while Japan's Nikkei jumped 1.8%. The FTSE in London rose 0.8% and the DAX in Frankfurt added 0.9%.

--Written by Melinda Peer and Shanthi Venkataraman in New York

.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.