Stocks fall sharply after weak data on jobs

NEW YORK — Serious doubts about the health of the job market and the pace of the economic recovery have markets on edge.

Stocks fell sharply Wednesday after private payroll processor ADP said that 179,000 new private sector jobs were added in April, far fewer than economists had expected. That raised worries about what the government's monthly jobs report for April will reveal when it's released Friday.

The report is due out Friday. Economists forecast that employers added 185,000 workers to their rolls in April. The unemployment rate is expected to remain unchanged at 8.8 percent.

The Institute for Supply Management also said its service sector index rose at the slowest pace in 8 months in April, as many companies express concerns about higher food and gas prices. The U.S. service industry includes nearly everything that isn't manufacturing — from hospitals and technology to financial firms and mining companies. It employs about 90 percent of the U.S. work force, so signs of a slowdown in the index have implications for the overall economy.

"I think we're getting indications that (the U.S. economy) is not that healthy," said Kim Caughey Forrest, equity research analyst at Fort Pitt Capital Group.

The Dow Jones industrial average fell 98 points, or 0.8 percent, to 12,709 in afternoon trading. The average of 30 large companies is still up 10 percent for the year, following better-than-expected earnings results.

The Standard & Poor's 500 index fell 11, or 0.8 percent, to 1,345. It remains up 7 percent for the year.

The Nasdaq composite index fell 17, or 0.6 percent, to 2,824. The technology heavy index is up 6 percent this year.

The weaker economic data also dragged down commodity prices. Crude oil slipped nearly 2 percent to $109 a barrel.

And falling commodity prices hurt the energy and materials companies whose fortunes depend on them. Mining giant Freeport-McMoRan lost 3.5 percent. Occidental Petroleum Corp. lost 3.2 percent.

Positive earnings results from Apple, Intel and other companies have sent all three indexes to 2011 highs over the past two weeks. But some of that excitement is now fading, said Sam Stovall, chief investment strategist at Standard & Poor's.

"In a sense, the market is already in digestion mode," Stovall said. "The earnings have already come out, they were so much better than expected; much of that has already been factored into share prices."

Earnings results were mixed on Wednesday. Kellogg Co. said its net income fell 12 percent as the world's biggest cereal maker dealt with higher costs. The results missed analysts' expectations. Kellogg's stock fell 1.7 percent.

Time Warner, the owner of Warner Bros. and HBO, said its first-quarter earnings fell 10 percent because of a lack of hit movies in the period. Advertising revenue rebounded, but its shares still fell 3.6 percent.

AOL's net income dropped sharply as the Internet company reported lower advertising and subscription revenue. Its stock fell 1 percent.

Bond prices rose, sending yields lower. The yield on the 10-year Treasury note fell to 3.23 percent from 3.26 percent late Tuesday.

Employment reports are likely to sway markets over the next two days. The Labor Department will release its weekly look at first-time applications for unemployment benefits Thursday morning, followed by the closely watched monthly jobs report on Friday. Economists forecast that employers added 185,000 workers to their rolls in April. The unemployment rate is expected to remain unchanged at 8.8 percent.