Stocks end lower as market takes a breather

U.S. stocks drifted lower Wednesday amid doubts over the latest bailout for Greece and concerns about global economic growth.

The Dow Jones industrial average fell 27 points, or 0.2%, to end at 12,939. The S&P 500 lost 4 points, or 0.3%, to 1,358. The Nasdaq sank 15 points, or 0.5%, to 2,933.

"It seems the market is taking a breather and waiting for its next catalyst after the strong run we've had," said David Levy, a portfolio manager at Kenjol Capital Management in Austin, Texas. "A period of consolidation or even a slight pullback wouldn't be surprising given the overbought market conditions."

On Tuesday, the Dow briefly rose above 13,000 -- a level not seen since mid-May 2008 -- before falling back. So far this year, the Dow is up 6%, the S&P 500 is up over 8% and the Nasdaq is up 13%.

Stocks were pressured early Wednesday by news that an index of business activity in the eurozone contracted in January. That came after a reading on China manufacturing showed a slow pace of growth.

Meanwhile, investors remain skeptical about the latest bailout for Greece, which eurozone finance ministers approved Tuesday after weeks of negotiations and market speculation.

While the agreement suggests Greece will avoid a default in the near term, analysts warn that the nation will eventually need more support. Greece's fate also depends on whether private-sector investors agree to a historic debt-reduction plan.

"The new bailout and restructuring deal is a welcome short-term reprieve," said John Praveen, chief investment strategist of Prudential International Investments Advisers. "However, it is unclear how successful it will be over the longer term in addressing the debt problem."

Fitch Ratings downgraded Greece by two notches Wednesday morning, pushing the country's rating further into junk territory. The downgrade suggests that a "default is highly likely in the near term."

On Tuesday, U.S. stocks stumbled at the close, shaking off a modest morning rally ignited by news of the Greek bailout.

World markets: European stocks closed lower. Britain's FTSE 100 slipped 0.1%, the DAX in Germany dropped 0.8% and France's CAC 40 edged 0.4% lower.

The Markit Eurozone PMI Composite index, a survey of purchasing managers in the manufacturing and services sector, slid to 49.7 from 50.4 in February.

Asian markets ended higher. The Shanghai Composite gained 0.9%, while the Hang Seng in Hong Kong added 0.3% and Japan's Nikkei jumped 1%.

China's preliminary HSBC Purchasing Managers' Index, a measure of manufacturing activity in the world's second-largest economy, rose to a 4-month high of 49.7 in February. While the index improved, it is still below 50, meaning that manufacturing activity continues to contract in China.

Companies: After the market closed, Hewlett-Packard reported first-quarter earnings that beat analysts' expectations, although sales growth was weak and the company issued a cautious outlook.

HP's results came on the heels of disappointing results from rival computer maker Dell late Tuesday.

On Wednesday, Luxury homebuilder Toll Brothers posted a $2.79 million loss Wednesday, compared to a $3.42 million profit last year. The company's revenues declined and missed expectations.

Apple was also in focus, as the tech giant faced Chinese company Proview International in a Shanghai courtroom on allegations that it does not own rights to the iPad trademark in China.

Netflix's stock continued to lose ground after Comcast said that it is working on a new subscription video-on-demand competitor, named "Streampix." But the streaming service will only be available to those who also subscribe to Comcast cable.

Shares of Johnson & Johnson edged higher after the company announced late Tuesday that CEO Bill Weldon will step down in April.

Chinese Internet giant Alibaba, which has been in the headlines lately for its tussles with stakeholder Yahoo, wants to take its publicly traded Web portal private.

Economy: Existing-home sales rose 4.3% in January to a seasonally adjusted annual rate of 4.57 million, according to the National Association of Realtors.

Economists were expecting a sales rate of 4.5 million, according to consensus estimates from Briefing.com.

Currencies and commodities: The dollar rose against the euro, the British pound and the Japanese yen.

Oil for April delivery slipped 27 cents to $105.98 a barrel.