U.S. stocks were dragged down by disappointing earnings and outlook warnings Wednesday despite a better-than-expected service sector report.
The market was lifted in the morning after latest data showed that contraction in the service sector slowed in January.
The U.S. Institute for Supply Management (ISM) reported on Wednesday that its January non-manufacturing index rose from 40.1 in December to 42.9, better than economists' expectation.
The ISM report helped ease investors' worries over rising unemployment after a report released earlier Wednesday showed that 522,000 private-sector jobs were lost in January.
However, poor earnings reports weighed on markets later in the day, as investors worried about U.S. economic outlook.
Kraft Foods Inc. reported a 72-percent drop in its fourth-quarter profit and it would cut 2009 guidance because of the stronger dollar and pension costs.
Time Warner Inc. posted a loss of 16.03 billion U.S. dollars in the fourth-quarter because of a write-down of 24.2 billion dollars for its cable, publishing and AOL assets.
Walt Disney Co. reported a sharply lower-than-expected quarterly profit as the global downturn hurt its TV advertising, DVD sales and theme parks. Disney shares fell more than 7 percent.
The Dow Jones industrial average fell 121.70 points, or 1.51 percent, at 7,956.66. The Standard & Poor's 500 Index slipped 6.30points, or 0.75 percent, at 832.21. The Nasdaq Composite Index shed 1.25 points, or 0.08 percent, at 1,515.05.
