Wall Street bulls battled headwinds in mid-afternoon trade yesterday as rising crude prices and economic data stifled optimism about the imminent earnings season, which is expected to offer an upbeat market outlook for the last quarter of the year.

By the close, the Dow Jones Industrial Average gave up 0.4 per cent at 10,177.68. The S&P 500 index was off 0.1 per cent at 1,134.49 and the Nasdaq Composite inched up 0.2 per cent to 1,955.50.

On Monday stocks extended gains from a rally late last week that sounded an upbeat note for the fourth quarter. Signs of recovering trading volumes boosted hopes that skittish investors were finding their way back into the market.

Yesterday's economic news strengthened headwinds for the bulls, as the Institute for Supply Management's index of service-sector activity declined slightly in September, confounding economists' forecasts of a modest rise.

The index reading still suggests the service sector is expanding and hints at increased job creation in services, which account for more than two-thirds of the economy. Further clarity on the labour market will come with Friday's data on non-farm payroll growth. However, another survey dented hopes for that report. Planned layoffs at US companies rose to the highest in eight months in September as hiring grew modestly, according to Challenger, Gray & Christmas, an employment consultancy.

A handful of companies issued guidance with the official debut of the third-quarter earnings season only two days away. However, a smattering of companies were set to report after the close and received some interest in morning trade. Yum Brands shares were 1.5 per cent higher at $41.50 ahead of the restaurant operator's results. Shares in Apollo Group, an educational services provider, rose 2.4 per cent to $76.21.

Forest Laboratories said it would exceed analysts' estimates in its second and third quarters, sending the shares 2.7 per cent higher to $46.97.

Also among drug stocks, Genelabs Technologies shares tumbled 65.6 per cent to $0.89 after the company announced the clinical trial failure of a drug aimed to limit bone loss among lupus patients.

Genentech shares gave up 5.3 per cent to $51.13 on news that the company received a subpoena to surrender documents in relation to its promotion of Rituxan, a lymphoma drug.

Chiron shares fell 16.6 per cent to $37.89 after UK regulators shut the company's primary plant for three months. The company supplies about half of the flu vaccines to the US and the move raises concern about a flu epidemic as the winter season mbegins.

In the technology sector, National Instruments shares fell 14 per cent to $26.83 after the company cut its quarterly earnings guidance, citing softening demand in European and Asian markets. Eastman Kodak, the photographic products company, saw its shares add 0.9 per cent to $33.80 after it said it would cut jobs at UK and French operations amid softening demand for its traditional products at the expense of growth in digital photography.

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