NEW YORK -- U.S. stocks declined Wednesday as the Federal Reserve said it would keep buying $85 billion in bonds each month, but may cut or increase the program depending on the economy.
"They are hedging against some weak economic data," Liz Ann Sonders, chief investment strategist at Charles Schwab, said of the Fed's language which opened the door to raising its bond purchases. "I don't think it suggests they are considering it," she added.
"For the most part, this is an expected nonevent," Sonders said.
The Federal Reserve's policy statement followed a two-day meeting, with the central bank's open market committee maintaining its monthly bond purchases at $85 billion and leaving its benchmark-interest-rate target unchanged at zero to 0.25 percent.
"We are in this soft spot," said Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia, referring to the U.S. economy.
Reports on Wednesday had private employers adding a less-than-anticipated 119,000 jobs last month, while separate data illustrated only tepid expansion in manufacturing in April.
Retreating after a four-session advance that added 163 points, the Dow Jones industrial average on Wednesday ended down 138.85 points at 14,700.95. Twenty-five of the Dow's 30 components lost ground, including Merck & Co. The drug maker reported quarterly revenue below market expectations and reduced its 2013 outlook.
"Earnings have actually looked good, but revenue has certainly been light this quarter. The companies beating on earnings and revenue, which is of course a rare animal this quarter, are trading well, while the opposite is true of the others," said PNC's Stone.
Of the 342 companies in the S&P 500 that have reported first-quarter earnings, 68.7 percent reported earnings above analyst expectations, according to Thomson Reuters.
Of the 235 companies that surpassed their earnings estimates, 52 percent missed their revenue estimate. In a typical quarter, 31 percent of companies that beat on earnings miss on revenue, according to Greg Harrison, corporate earnings research analyst at Thomson Reuters.
After closing April with a sixth straight monthly gain, its longest such stretch since September 2009, the S&P 500 index on Wednesday lost 14.87 points to 1,582.70.
The Nasdaq composite retreated 29.66 points to 3,299.13.
Oil prices declined $2.43 to $91.03 a barrel after U.S. inventories hit an 82-year high and gold futures lost $25.90 to end at $1,446.20 an ounce on the New York Mercantile Exchange.
Treasury prices rose, with the yield on the benchmark 10-year note down to about 1.64 percent.
"In a liquidity-driven market, cash flow is king. While stocks are fully priced by traditional measures, they are remarkably cheap through bond goggles," wrote Jack Ablin, chief investment officer at BMO Private Bank.
Apple Inc. is "the latest company to exploit the gaping valuation spread between
bonds and stocks," said Ablin, referring to the iPhone maker's sale of $17 billion of debt on Tuesday in what amounted to the largest corporate bond offering ever.
MasterCard's shares declined 2.4 percent after the payments processor reported quarterly revenue slightly below expectations.
Time Warner Inc. shares fell after the media company also reported revenue short of Wall Street estimates.
Genworth Financial Inc. climbed after earnings more than doubled on better results by its home-loans department.
Wednesday's economic reports had Automatic Data Processing Inc. reporting private-sector jobs in April rose by a smaller-than-expected 119,000.
The ADP report is "disappointing, and will probably lead most people to be more conservative on the payroll number on Friday," said PNC's Stone, referring to the government's scheduled release of data on nonfarm payrolls for April.
While "hardly a perfect guide to Friday's payroll report, weakness in the (ADP) number is never welcome," noted Dan Greenhaus, chief global strategist at BTIG LLC.