NEW YORK (CNN/Money) -
The selloff extended to day three Wednesday as investors tried to push stocks higher but again found profit-taking too tempting after the market's fourth-quarter rally.
The Dow Jones industrial average (down 32.95 to 10,597.83, Charts) fell 0.3 percent and the broader Standard & Poor's 500 (down 4.31 to 1,183.74, Charts) index posted a similar decline.
The Nasdaq composite (down 16.62 to 2,091.24, Charts) sank around 0.8 percent.
"You've had a strong move in the market in the last two months and this to me looks like healthy consolidation," said Tim Heekin, head of stock trading at Thomas Weisel Partners.
"You've had a nice selloff now for a few days," he added. "But unfortunately, I think we have a little bit more to do on the downside."
Treasury prices were little changed, while the dollar fell versus the yen and was flat versus the euro. Gold continued to slide, falling with other dollar-traded commodities.
Stocks slumped Monday and Tuesday, the first two trading days of the year, in a broad-based bout of profit-taking following the rally that started last October.
Declines accelerated Tuesday afternoon, following the release of the minutes from the Federal Reserve's December meeting, in which the central bank's policy-makers noted more concern about the threat of inflation than previously thought.
Stocks seesawed Wednesday, briefly turning higher after a strong read on the services sector of the economy, and turning lower as tech declines kicked in. But by the close, the downward pressure won out.
Analysts say Friday's December payrolls report could be the next event to shake the market out of its downward slide.
Employers are expected to have added 175,000 to their payrolls after adding 112,000 in November, according to a survey of economists by Briefing.com. The unemployment rate, generated by a separate survey, is expected to hold steady at 5.4 percent.
Ahead of the monthly report is the weekly jobless claims report, due before the bell Thursday. The report is expected to show that around 330,000 Americans filed new claims for unemployment last week, according to economists surveyed by Briefing.com. The number stood at 326,000 the week before.
Wednesday's movers
The influential chip sector fell for the third session in a row, after trying to stabilize near midday. The Philadelphia Semiconductor (down 6.11 to 404.25, Charts) index, or the SOX, fell 1.5 percent.
Among decliners in the sector, Xilinx (down $0.90 to $27.54, Research) slipped after warning that revenue for the just-completed quarter won't meet current expectations, which revived some fears of excess inventory for the sector.
But those fears were somewhat tempered by chipmaker LSI Logic (up $0.71 to $5.73, Research), which popped more than 14 percent after boosting its fourth-quarter revenue forecast.
Among other movers, airline stocks slumped after Delta Airlines said it was cutting fares by as much as 50 percent for travel in the United States. The move had been rumored as a possibility for some time, and competitors had stated that such a move would hurt revenue across the industry.
Delta (down $0.51 to $6.80, Research), AMR (down $0.96 to $9.05, Research) and Northwest (down $1.04 to $8.60, Research) all posted declines.
Electronics retailer Circuit City (down $1.25 to $13.71, Research) slumped after reporting that December same-store sales fell 5.8 percent, below expectations, due to weaker customer traffic. Same-store sales refers to business at stores open a year or more.
A number of retailers are due to report December sales over the next day, giving investors a better read on the health of the critical holiday shopping period.
Strength in select issues helped protect the Dow from a steeper selloff.
Among the gainers, component Procter & Gamble (up $0.57 to $55.07, Research) rose about 1 percent after Banc of America Securities boosted its rating on the stock to "buy" from "neutral."
Component AIG (up $1.10 to $67.35, Research) added 1.6 percent after boosting its quarterly dividend by 67 percent, to 12.5 cents per share from 7.5 cents per share.
Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by around 3 to 1 on volume of 1.73 billion shares. On the Nasdaq, losers beat winners by more than 11 to 5 on volume of around 2.39 billion shares.
The Institute for Supply Management's December services index, released shortly after the start of trading, rose to 63.1 from 61.3 in November. Economists surveyed by Briefing.com thought it would slide to 61.0.
Oil prices slipped following the release of the weekly inventory report. Stockpiles of heating oil rose more than expected.
U.S. light crude oil for February delivery lost 52 cents to settle at $43.39 a barrel on the New York Mercantile Exchange.
Treasury prices inched higher following Tuesday's big selloff. The yield on the 10-year note stood at 4.28 percent, down from 4.29 percent late Tuesday. Bond prices and yields move in opposite directions.
The dollar was modestly higher versus the euro and was weaker versus the yen, after rallying soundly for the past two days.
COMEX gold fell $1.90 to settle at $427.30 an ounce.
In global trade, Asian-Pacific and European markets closed lower.
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