Stocks end mixed on Fed report of slow recovery

NEW YORK — Early gains in stocks unraveled Wednesday on concern that the economy will see a slow recovery.

Stocks ended mixed after the Federal Reserve said that economic activity has improved in nine of its 12 districts but that the gains are "modest."

The report dampened the enthusiasm that followed an upbeat report on services industries and more takeover news. The Dow Jones industrial average fell 9 points. For a second day, the Dow erased its losses for 2010 before surrendering its advance by the close. The slowdown came after three straight days of gains.

The early gains followed more indications of a recovery in the economy. But the Fed's report in the afternoon raised concerns that the rebound might continue at a slower pace.

Major stock indexes stand at their highest levels since mid-January, when the Standard & Poor's 500 index began a 9.2 percent pullback on concerns that the market was getting too far ahead of the still-struggling economy.

Stocks got an early boost from a report that the services industries grew at the fastest rate in two years last month. Growth in services industries is seen as crucial for a rebound. The Institute for Supply Management's services index for February rose to 53 from 50.5 in January. Economists had forecast that the index would hit 51.

More corporate dealmaking also helped boost stocks for much of trading, as occurred earlier in the week. Acquisitions signal that businesses are confident in the economy and see some companies as undervalued. In the latest deal, private equity firm Elliott Associates offered to buy the 91.5 percent of software maker Novell Inc. that it doesn't already own.

Separately, a report on the labor market came in as expected. Payroll company ADP said employers cut 20,000 jobs last month.

The ADP report is seen an early indicator of the government's closely watched monthly employment report, though there are often wide variations. The Labor Department is expected to report on Friday that the unemployment rate edged up to 9.8 percent last month and that employers cut 50,000 jobs. The struggling labor market is still one of the biggest concerns for investors.

Tom Samuels, manager of the Palantir Fund in Houston, said he isn't seeing enough of an improvement in economic numbers to justify confidence in the recovery.