U.S stocks fall on soft private-sector jobs report; Dow falls 1.43%

U.S. stocks dropped on Wednesday after a private-sector jobs report, often viewed as a precursor to the official  unemployment report, missed expectations.

Hopes the data may prompt the Federal Reserve to continue stimulating the economy with tools that normally pump up stock prices failed to curb the selloff in equities markets.

Monetary stimulus tools such as the Fed's USD85 billion monthly bond-buying program push down interest rates and flood the economy with liquidity to spur recovery, a combination that sends stock prices rising as a side effect.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 1.43%, the S&P 500 index ended down 1.38%, while the Nasdaq Composite index fell 1.27%.

Payroll processor ADP reported earlier that non-farm private payrolls rose by 135,000 in May, well below expectations for an increase of 165,000. 

The previous month’s figure was revised down to a gain of 113,000 from a previously reported increase of 119,000.

Elsewhere, the Institute of Supply Management said its U.S. non-manufacturing purchasing managers' index rose to 53.7 in May from 53.1 in April. 

Analysts had expected the index to rise to 53.5, though the numbers did little to boost spirits on Wall Street.

In a separate report, the Commerce Department said U.S. factory orders rose 1% in April, missing expectations for an increase of 1.6%.

While disappointing economic indicators have sent stock prices rising in recent sessions by stoking hopes the Fed will continue to support the economy, uncertainty as to when the U.S. central bank may decide the economy must stand on its own bruised share prices and sparked demand for the safe-haven dollar on Wednesday.

Years of on-and-off Fed stimulus programs coupled with recent quarters of better-than-expected earnings have sent stocks rallying, especially in early 2013, leaving many investors worried today that corrections may be brewing.

Most stocks finished the session in negative territory.

Leading Dow Jones Industrial Average performers included Cisco Systems, down 0.16%, Johnson & Johnson, down 0.48%, and Pfizer, down 0.58%.

The Dow Jones Industrial Average's worst performers included Intel, down 2.56%, Alcoa, down 2.15%, and DuPont, down 2.10%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 1.68%, France's CAC 40 fell 1.87%, while Germany's DAX 30 finished down 1.20%. Meanwhile, in the U.K. the FTSE 100 finished down 2.12%.

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Forex - GBP/USD gains on weak U.S. jobs data, strong U.K. services data

Weaker-than-expected U.S. jobs data coupled with better-than-expected U.K. service-sector activity sent the pound strengthening against the greenback on Wednesday.

In U.S. trading on Wednesday, GBP/USD was trading at 1.5399, up 0.56%, up from a session low of 1.5292 and off from a high of 1.5410.

The pair was likely to find support at 1.5008, the low from May 29, and resistance at 1.5592, high from May 8.

The Markit U.K. service-sector purchasing managers’ index rose to 54.9 in May from 52.9 in April, outstripping expectations for a reading of 53.0.

The data reinforced already growing expectations that the Bank of England will keep monetary policy unchanged at its monthly meeting on Thursday, especially in wake of better-than-expected U.K. manufacturing and construction data earlier in the week, which gave Cable support.

The dollar, meanwhile, came under pressure after softer-than-expected jobs data hit the wire.

Payroll processor ADP reported earlier that non-farm private payrolls rose by 135,000 in May, well below expectations for an increase of 165,000, which weakened the dollar. 

The previous month’s figure was revised down to a gain of 113,000 from a previously reported increase of 119,000.

Elsewhere, the Institute of Supply Management said its U.S. non-manufacturing purchasing manager's index rose to 53.7 in May from 53.1 in April. 

Analysts had expected the index to rise to 53.5, which gave the greenback some support.

In a separate report, the Commerce Department said U.S. factory orders rose 1% in April, missing expectations for an increase of 1.6%, which fueled talk the Federal Reserve may be more inclined to keep monetary policy loose.

The pound, meanwhile, was up against the euro and down against the yen, with EUR/GBP trading down 0.53% at 0.8496 and GBP/JPY down 0.34% at 152.72.

On Thursday, all eyes will be on the Bank of England, which will announce its decision on benchmark interest rate.

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