Stocks hobbled by renewed credit jitters
Credit concerns flare after Moody's puts bond insurers on negative credit watch, eclipsing stronger economic data and falling oil prices.
NEW YORK (CNNMoney.com) -- Stocks closed Wednesday's session mixed, at the end of a choppy session, after reports that Moody's may lower the credit ratings of two key bond insurers overshadowed some upbeat economic data and lower oil prices.
The Dow Jones industrial average (INDU) and the broader Standard & Poor's 500 (SPX) lost a few points, while the Nasdaq composite (COMP) ended roughly 1% higher.
Stocks opened lower but rallied after a report showed moderate expansion in the services sector. The major indexes remained in positive territory for most of the day as oil prices declined and shares of Lehman Brothers, which have been battered by credit concerns, rose following an upgrade by Merrill Lynch.
But stocks came under pressure later in the session after ratings agency Moody's placed bond insurers MBIA (MBI) and Ambac (ABK) on review for a possible downgrade of their credit ratings.
Ron Kiddoo, CIO at Cozad Asset Management, thinks the rumors surrounding Lehman Brothers (LEH, Fortune 500) and the worries about bond insurers prevented the market from rallying on lower oil prices Wednesday.
"Credit concerns have crept back into the market," he said.
Meanwhile, technology stocks saw modest gains as many investors shifted into the sector to avoid exposure to the volatile financial services market.
On Friday, investors will get a better sense of the economy's direction when the Department of Labor releases its May unemployment report.
Economic data: The Institute for Supply Management said Wednesday that its services sector index reading for May dipped to 51.7 from 52 in April, versus forecasts for a drop to 51. A reading above 50 indicates growth in the sector, and a reading below 50 represents a sector-wide decline.
Payroll services firm ADP reported non-farm private employment rose 40,000 last month, countering forecasts for a decline of 30,000. The report is a lead-in to Friday's more closely watched government employment report.
The government said that first-quarter productivity was revised to a gain of 2.6% from an initial read of 2.2%, topping forecasts for a rise to 2.5%.
United Airlines announces cuts: The unit of UAL Corp. said it will reduce its fleet by 100 planes and cut as much as 1,600 jobs amid losses related to higher fuel costs. UAL (UAUA, Fortune 500) shares gained nearly 9%.
Smuckers to buy Folgers for $3 billion: Smuckers (SJM), the jam and jelly maker, has agreed to purchase the coffee company from Procter & Gamble (PG, Fortune 500) in an all-stock deal. (Full story.)
Gas hits new record, oil drops: The national average price for a gallon of regular unleaded gas rose to $3.983 from $3.978 the previous day, AAA reported. It was the 27th record high in 28 days.
Meanwhile, U.S. light crude oil for July delivery fell $2.01 to $122.30 a barrel on the New York Mercantile Exchange, following the release of the government's weekly oil inventories report. The report showed a bigger-than-expected rise in gas stockpiles and a surprise drop in crude supplies.
Other markets: The dollar slipped versus the euro and the yen, after rising for the past few sessions.
Treasury prices fell, lifting the yield on the 10-year note to 3.97% from 3.89% late Tuesday. Bond prices and yields move in opposite directions.
COMEX gold for August delivery fell $1.70 cents to $883.80 an ounce. 
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