A reading on the nation's service economy, whose industries range from banking to retail and travel and account for 80 percent of U.S. economic activity, came in as expected and gave investors little reason to rally on hopes of an interest rate cut. But it also appeared to quiet some concerns about a sharp economic slowdown.

The Institute for Supply Management report showed the service sector expanded at a slower pace in September than in August. The trade group's non-manufacturing index fell to 54.8 from 55.8 in August as expected; the index is now at its lowest point since March. A reading above 50 indicates economic expansion, while a figure below 50 signals contraction.

Comments from former Federal Reserve Chairman Alan Greenspan that the "worst is over" in the credit turmoil that swept global markets in recent months appeared to give a lift to investor sentiment. His comments followed a similar assessment from Citigroup Inc. on Monday.

While the day's economic readings are notable, investors are awaiting the September employment report due Friday, which can signal whether consumer spending will continue apace.

Wall Street appears to be taking many economic readings in stride, perhaps expecting some slowdown before the Fed's rate cut is reflected in economic data. Often, such cuts can take more than a year to fully work themselves into the economy.

"With all those numbers, unless it's really bad we're fine because people can say it's still a function of the dislocations that we saw in August," said Kurt Wolfgruber, chief investment officer at OppenheimerFunds Inc., adding that it is still too soon to see the effects of the Fed's move in some economic data.

In early afternoon trading, the Dow Jones industrial average fell 40.64, or 0.29 percent, to 14,006.67. The Dow moved back above the 14,000 mark on Monday after spending 2 1/2 months below that level amid concerns about soured mortgages, tighter access to credit and the ongoing housing market slump.

Broader stock indicators also fell. The Standard & Poor's 500 index fell 3.17, or 0.20 percent, to 1,543.46, and the Nasdaq composite index fell 4.51, or 0.16 percent, to 2,742.60.

Bond prices slipped Wednesday after the economic readings and as stocks came off their lows. The yield on the benchmark 10-year Treasury note rose to 4.57 percent from 4.53 percent late Tuesday. Bond prices move opposite their yields.

A weaker ISM service sector report could have ignited investor enthusiasm for another rate cut by the Fed, which lowered its key lending rate last month by a larger-than-expected half percentage point. Many investors expect the central bank to trim rates further this year, but there is debate over whether another reduction might come at the Fed meeting Oct. 30-31 or in December.

In other economic news, home buying has continued at its sluggish pace. The Mortgage Bankers Association said mortgage application volume fell 2.7 percent in the week ended Sept. 28. The MBA composite index, which gauges the level of mortgage applications, fell to 636.7 from 654.2 a week earlier.

In corporate news, Germany's Deutsche Bank AG on Wednesday said it would book charges totaling about $3.1 billion in the third quarter due to losses on loans, leveraged loans and structured credit products amid turmoil in the mortgage lending market. But the bank expects gains on asset sales and tax credits to offset those losses. Deutsche projects a profit of $1.98 billion, higher than a year ago.

The bank's forecast follows warnings on results from Citigroup and Switzerland's UBS AG on Monday. However, shares of banks have been resilient this week, as investors appear relieved to get bad news of the turbulent third quarter out of the way amid indications earnings may return to normal levels this quarter.

In commodities trading, gold prices following a sharp fall on Tuesday. Oil prices rose 31 cents to $80.36 on the New York Mercantile Exchange.

The dollar was mixed against other major currencies.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 624.9 million shares.

The Russell 2000 index of smaller companies fell 1.08, or 0.13 percent, to 830.89.

Overseas, Japan's Nikkei stock average closed up 0.90 percent, while Hong Kong's Hang Sang index fell 2.55 percent. European markets advanced. Britain's FTSE 100 gained 0.54 percent, Germany's DAX index rose 0.11 percent, and France's CAC-40 gained 0.12 percent.

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