MARKET SNAPSHOT: U.S. Stocks Choppy; Mild Reaction To Beige Book

By Anora Mahmudova, MarketWatch

NEW YORK (MarketWatch) -- The U.S. stock market traded in a choppy but narrow range on Wednesday, as investors reacted mildly to a slew of disappointing and inconclusive economic reports.

According to the Federal Reserve's Beige Book U.S. economic conditions in January and early February were difficult to discern due to severe cold weather. In sector after sector and region after region, the weather wreaked havoc on conditions, the report said.

Before the bell, a report from Automatic Data Processing showed the private sector added fewer jobs than expected as severe winter weather continued to affect hiring.

After the open, a survey of executives showed U.S. service-sector companies expanded in February at a sharply slower pace, and bad weather was only part of the problem.

The main indexes reacted mildly to the Beige Book and disappointing employment and services-sector reports and struggled to build on the previous day's rally. The S&P 500 and Russell 2000 on Tuesday closed at record levels after gaining 1.5% and 2.8%, respectively, their best day of the year.

The S&P 500 (SPX) was a point lower at 1,873.20, hovering at near-record levels.

The Dow Jones Industrial Average (DJI) shed 42.77 points, or 0.3%, to 16,353.37.

The Nasdaq Composite (RIXF) was up 5 points, or 0.1%, at 4,357.34. The Russell 2000 (RUT) dropped 5 points, or 0.4% to 1,203.99, pulling away from its all-time high level reached on Tuesday.

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"Investors are ignoring current economic reports because it is impossible to tell how much the cold and snowy weather was a factor in continued weakness," said Kate Warne, investment strategist at Edward Jones.

"After a big relief rally on Tuesday, markets are taking a pause and are likely to muddle through until the official jobs report on Friday," she added.

The Beige Book said that eight of the 12 Fed districts reported that economic conditions continued to expand though Feb. 24. The assessment is not likely to stop the Fed from continuing its steady reduction in monthly asset purchases.

Private-sector-employment gains slightly picked up in February, but remained slow, hit by unusually poor weather, Automatic Data Processing Inc. reported Wednesday. Private-sector employers added 139,000 jobs last month, up from 127,000 in January, but down from 205,000 in February 2013, according to ADP.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote that the report was weak, but distorted by the impact of the soft January official data, which was reduced.

The Institute for Supply Management said its nonmanufacturing index dropped to 51.6% last month from 54% in January. That was well below the 53% forecast of economists surveyed by MarketWatch. The employment gauge tumbled nearly 9 points to 47.5%, marking the lowest level since March 2010 as severe weather hindered hiring in some sectors such as construction and wholesale trade.

The Fed will release its Beige Book survey of economic conditions at 2 p.m. Eastern, and a handful of Fed speakers are on the docket.

Smith & Wesson surges, HCI Group drops

Among individual stocks, shares of (SWB) jumped 18% after the gun maker topped Wall Street's forecasts and raised its estimates for the year late Tuesday.

Brown-Forman Corp. (BFA) posted a 5% sales rise and lifted its full-year earnings per share view. Shares in the liquor and winemaker rose 3.8%.

PetSmart Inc. (PETM)(PETM) shares fell 1.2% after fourth-quarter earnings fell by less than expected.

Hovnanian Enterprises Inc. (HOV) shares were down 9.2% after quarterly results missed expectations.

HCI Group Inc. (HCI) shares fell 17% after the insurer posted earnings late Tuesday.

In overseas markets, Europe's benchmark stock index moved lower on Wednesday, pulling back after its biggest rally in eight months. The benchmark Stoxx Europe 600 index was down 0.1%.

Asian stocks had a mixed session. The Nikkei 225 index rose 1.2%, but the China Shanghai Composite fell 0.9%. At the start of China's annual meeting of the legislature, the National People's Congress, officials said the government will hold its economic growth target at 7.5% in 2014, showing no change from 2012 or 2013.

Oil prices were lower while gold recovered earlier losses.

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