"We had a pretty explosive rally yesterday, and the day after we tend to gather our thoughts and say, well Texas Instruments, that is not good for tech and telecom," said Art Hogan, chief market strategist at Jefferies & Co.
"The focus is clearly on the Fed; [Fed Chairman Ben] Bernanke had his chance to refute market expectations that he is going to cut 25 basis points. If he felt strongly the market was headed in the wrong direction he would have said something," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
While Wall Street would draw a psychological boost from a Fed interest rate cut, that move alone might not be enough to offset problems in the housing market, said Andrew Horowitz, founder of investment advisory firm Horowitz & Co. .
The Dow Jones Industrial Average was off 16.7 points at 13,291.7, with 12 of its 30 components trading lower.
The S&P 500 was up 0.07 points at 1,471.56, while the Nasdaq Composite ended 5.4 points off, at 2,592.07.
On Tuesday, stocks rallied, with the Dow gaining 180.5 points, a climb attributable in part to Sept. 11, said Pado. "Yesterday was sort of patriotic; it would be frowned upon to be shorting or selling into the market. A lot of bears stayed out of the confrontation, with room to lift easily on light volume."
Fuel for thought
Shares of Dow component Exxon Mobil Corp. gained as did crude-oil futures, with the former rising 0.7% and the latter trading above $80 a barrel after U.S. government data showed supplies dropped more than 7 million barrels.
Nearly 1.3 billion shares were exchanged at the New York Stock Exchange, and declining stocks ahead of advancing issues 9 to 7. At the Nasdaq, 1.9 billion shares exchanged hands, and declining issues topped those advancing by a count of 3 to 1.
On the New York Stock Exchange, crude oil for October delivery touched $80 a barrel for the first time ever, before finishing the session at $79.91 a barrel, up 2.2%, or $1.68. .
In electronic trade ahead of the opening bell, Exxon Mobil shares had fallen after the International Energy Agency cut its outlook for global oil demand, saying it doesn't know how the turmoil from the U.S. subprime mortgage market will affect demand.
Shares of Texas Instruments declined 1.7% after the company late Tuesday tightened its financial targets for the third quarter.
Shares of Amgen and Johnson & Johnson advanced, Amgen up 3.6% and Johnson & Johnson up 0.7% after a Food and Drug Administration advisory committee did not back a limit on the use of anemia drugs the companies produce.
Shares of Pathmark Stores Inc. slid 4.9% after the company reported its fiscal second-quarter net loss widened to $18.8 million from $8.8 million one year earlier.
Shares of Apache Corp. advanced 2.4% after the oil and gas producer's upgrade to buy from neutral by Goldman Sachs.
Chip-equipment maker ASML Holdings was upgraded to outperform from underperform by Credit Suisse. Its shares closed 1.1% lower.
Before meeting Wednesday with mortgage-servicing companies, including the chairman of Countrywide Financial Corp. , Treasury Secretary Henry Paulson said the subprime housing woes and ongoing crunch in the financial markets "will take some time to work its way out." .
While Paulson reiterated his view that the U.S. economy remains strong, others questioned whether the housing meltdown would harm the economy overall.
"Nationwide, consumer credit scores are falling faster than Britney Spears' career opportunities. Subprime credit delinquencies are morphing into prime credit delinquncies, raising the question: Will the housing recession broaden into a full-blown economic recession?" said Jack Ablin, chief investment officer at Harris Private Bank
On the NYME, gold for December delivery edged 50 cents lower at $720.6 an ounce. .
The Nikkei 225 closed 0.5% lower after Japanese Prime Minister Shinzo Abe said he would resign following cabinet scandals and a low approval rating.
The dollar sank to a record low against the euro amid growing expectations that the Federal Reserve would cut U.S. interest rates. .
Treasury prices lost early gains, sending yields higher, with the benchmark 10-year note off 8/32 to close at 102 24/32, yielding 4.406%. .
By Kate Gibson