Job market worries push stocks in the red

NEW YORK (CNNMoney.com) -- The Dow erased earlier gains and turned lower Wednesday afternoon, joining the other two major indexes in the red, as investors mulled two reports showing continued weakness in the job market. The news comes ahead of the closely-watched monthly jobs report due Friday. Dow Jones industrial average (INDU) fell 22 points, or 0.2%, with less than three hours left in the session. Dragged down by AT&T (T, Fortune 500) and Verizon (VZ, Fortune 500), the bluechip index added as many as 29 points earlier in the day -- thanks to gains in GE (GE, Fortune 500) and Alcoa (AA, Fortune 500).

All three major gauges finished at five-month highs Tuesday. A report showing that the service sector activity improved in September, and a surprise move by Japan's central bank to cut interest rates, sparked a broad-based rally.

But the enthusiasm evaporated Wednesday, as the dour jobs reports weighed on investor sentiment ahead of the government's September jobs report on tap for Friday.

"The market remains focused on economic news, and most of the concerns are over the employment picture. So anything like today's payroll numbers remind investors that the economy is still far from perfect, which leads to some weakness," said Matt King, chief investment officer at Bell Investment Advisors.

According to a consensus of economists polled by Briefing.com, the number of jobs is expected to remain flat in the upcoming monthly report. At the same time, the unemployment rate is expected to have ticked up to 9.7% from 9.6%.

But King said corporate earnings season, which unofficially kicks off after the closing bell on Thursday when Alcoa (AA, Fortune 500) reports its results, could lift the markets.

"We're expecting company results to show the same type of improvement we've seen for most of this year, and regain the market's attention," King said. "As those come in, stocks should move higher throughout the fourth quarter."

Economy: Payroll processing firm ADP reported the private sector jobs plunged in September, trouncing the forecast of an increase.

The U.S. economy lost 39,000 private sector jobs last month, said the ADP on Wednesday -- which was much worse than expected. Economists were forecasting the report to show private sector employers added 18,000 jobs in September.

The number of job cuts planned by employers edged up slightly in September. However, the number remained near a rock bottom 10-year low reported in August, according to a report from outplacement firm Challenger, Gray & Christmas.