Market Struggles for Grip as European Fears Persist

Stocks were little changed on Wednesday as European finance ministers appeared ready to prop up struggling banks while reports on the U.S. labor market and services sector came in stronger than expected.

Early trading was choppy as the market struggled for firm direction after a dramatic turnaround late on Tuesday in which shares ended sharply higher on reports European officials would act to safeguard banks.

Over six sessions, the S&P has fallen 10 percent and investors who bet against the market were suddenly forced to cover short positions as the market shifted.

All measures we look at indicate that the market is extremely cheap, but we're all still waiting on developments from Europe, said Charles Lieberman, chief investment officer of Advisers Capital Management, LLC in Hasbrouck Heights, New Jersey. There remain questions about how it will all be resolved, and it is by no means certain that the resolution will come in a responsible way that won't cause market turmoil.

The S&P briefly dipped into bear market territory on Tuesday, meaning the index declined 20 percent from recent highs.

Big reversals late in a session are not often good predictors of direction. Since 2001, there have been nine days when the market rebounded from a 1 percent loss in the last hour -- and in eight of those, stocks fell the next day, according to Bespoke Investment Group of Harrison, New York.

U.S. private-sector employers added 91,000 jobs in September, according to the ADP National Employment Report, topping forecasts and increasing optimism about Friday's non-farm payrolls report from the Labor Department.

This is obviously better than expected, but the correlation between this and payrolls has been weak so I don't think anyone will get overly excited yet, Lieberman said.

A report from the Institute for Supply Management showed the U.S. services sector expanded slightly more than expected in September.

The Dow Jones industrial average was down 5.41 points, or 0.05 percent, at 10,803.30. The Standard & Poor's 500 Index was down 0.24 point, or 0.02 percent, at 1,123.71. The Nasdaq Composite Index was down 4.40 points, or 0.18 percent, at 2,400.42.

European equities were further lifted on Wednesday by reports finance ministers expressed a new sense of urgency about the crisis and would prepare a plan to recapitalize banks. The FTSEurofirst 300 index of top European shares rose 2.7 percent.

Walt Disney Co rose 2.7 percent to $30.65 and was one of the top percentage gainers on the Dow after Citigroup upgraded the stock to buy.

Warehouse club operator Costco Wholesale Corp fell 2 percent to $79.99 after reporting fourth-quarter earnings and revenue that missed expectations. On the upside, agriculture company Monsanto Co rose 2.5 percent after its profit topped forecasts.

(Reporting by Ryan Vlastelica; Editing by Kenneth Barry)