NEW YORK — The closer investors get to the government’s July employment report, the more cautious they become.
Stocks slipped Wednesday as investors shied away from big moves ahead of the government’s monthly reading on job losses and the unemployment rate, which comes out before the start of trading Friday. The pullback, which took the Dow Jones industrials down 39 points, followed a 34-point gain Tuesday that was a slowdown from the previous day’s triple-digit advance.
The big concern on Wall Street is layoffs and whether companies trying to preserve their profits during the recession are continuing to slash jobs at a furious pace. Job cuts have to slow for the economy to have a solid recovery.
The caution in Wednesday’s trading followed a disappointing report on the service industry. The Institute for Supply Management said its service index, a measure of the health of retail, financial services, transportation and health care companies, fell to 46.4 in July from 47 in June. It was the 10th straight monthly slide.
Still, there are plenty of signs of strength on Wall Street, and one is the fact that Wednesday’s very modest loss was the biggest point drop in the Dow since July 7. Investors have been looking for the market to pause after it started to shoot higher in mid-July.
“The market has just had a pretty good advance and is looking for a reason for a pullback,” said Henry Herrmann, CEO of investment management firm Waddell & Reed.
The Dow fell 39.22, 0.4 percent, to 9,280.97. The broader Standard & Poor’s 500 index fell 2.93, 0.3 percent, to 1,002.72, while the Nasdaq composite fell 18.26, 0.9 percent, to 1,993.05.
Treasury prices fell after the government said it would auction $75 billion in notes next week. Some investors are worried that the government will have to entice buyers by offering greater returns.
Analysts said the drop in stocks was welcome because building on gains in a steplike fashion is more sustainable than a surge without breaks.
“It would only be natural to hesitate here as it tries to make up its mind as to what the next move will be,” said Michael Sheldon, chief market strategist at RDM Financial.
The jobs report could reshape ideas about when the economy might recover. Economists expect it will show the jobless rate rose to 9.6 percent as employers cut 320,000 jobs last month, better than the 467,000 lost in June.
