 "Wall Street drops on signs of weak economy, North Korea")
News the Pentagon was sending a missile defense system to Guam in the coming weeks and remarks by Defense Secretary Chuck Hagel that North Korea posed a "real and clear" danger added to investor caution.
The ADP National Employment report on private-sector jobs showed less-than-expected hiring in March, which was a worrying sign for investors before the Labor Department's March non-farm payrolls report on Friday.
Wednesday's market decline came a day after the benchmark S&P 500 and the Dow finished at record highs. Energy and financial sectors led the day's fall on the S&P 500, with the S&P 500 financial index down 1.7%.
"People continue to push the thesis that the bull market will remain intact as long as housing continues to be strong, and there will be a little doubt put on that thesis if the jobs number Friday is underwhelming," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
Worries about North Korea added "another risk element to the market," he said.
Defense company shares gained despite the broader move lower. Shares of Northrop Grumman were up 1.1% at $70.18, while shares of General Dynamics were up 2.1% at $68.39.
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The Dow Jones industrial average was down 111.66 points, or 0.76%, at 14,550.35. The Standard & Poor's 500 Index fell 16.56 points, or 1.05%, at 1,553.69, its biggest daily percentage decline since February 25. The Nasdaq Composite Index was down 36.26 points, or 1.11%, at 3,218.60.
The S&P 500, up 8.9% since the start of the year, has come close to its intraday record level of 1,576.09 in the past few sessions before pulling back, causing analysts to question if the recent rally is sustainable.
The Dow Jones Transportation Average, seen as a barometer of economic activity, fell 1.3% to 6005.95, closing below its 50-day moving average for the first time since November 21.
On Tuesday, decliners beat advancers in the market despite gains in the three major indexes. Also, healthcare, consumer staples and utilities, seen as the S&P's most defensive sectors, have led this year's rise on the index.
Energy shares were among Wednesday's biggest decliners, with US crude oil prices falling 2.8%. Shares of Chevron were down 1% at $117.78.
Other declining stocks included ConAgra Foods Inc , which fell 1.9% to $34.85 after reporting third-quarter earnings that fell 57%, though revenue grew.
Monsanto Co rose 0.9% to $104.51 after raising its full-year profit forecast.
First-quarter earnings forecasts have been lowered since the start of the year, with S&P 500 company earnings now expected to have risen 1.6% in the quarter compared with a year ago, according to Thomson Reuters data. A January 1 forecast put earnings growth at 4.3%.
Shares of Zynga Inc surged 15% to $3.53 after the company said it would begin offering poker and casino-style games in Britain in partnership with Bwin.party Digital Entertainment .
The ADP report showed US companies hired at the slowest pace in five months, far below what economists had expected, though the February report was revised upward.
The more widely watched US government jobs report, due Friday, is expected to show 2,00,000 jobs were created last month.
In another report, the Institute for Supply Management's March services sector index also came in below expectations, with the pace of growth at the lowest level in seven months.
Volume was roughly 7.1 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.
Decliners outpaced advancers on the NYSE by about 4 to 1 and on the Nasdaq by nearly 3 to 1.