A new report on U.S. factory orders was the latest in a sign that the economy may not rebound as fast as hoped.
The Commerce Department said durable goods orders fell 2.5% in June, the largest drop since January and a sign of continuing troubles in the auto and aircraft industries.
The stock market's two-week market rally is on hold after earnings reports and the Conference Board's reading on consumer confidence also fell short of expectations.
The markets appeared unmoved by the Internet search deal announced between Microsoft and Yahoo. Traders brushed off gains in overseas markets, which rose on generally positive earnings from leading industrial companies.
In one of the day's first earnings reports, media conglomerate Time Warner Cable TWC said its second-quarter profit fell 34% on lower revenue in the company's publishing, movie and online properties. Its earnings topped estimates but revenue fell short of projections.
Sprint Nextel S joined in with disappointing news. The nation's third-largest wireless provider said its loss widened in the second quarter as revenue and subscribers continued to decline.
Investors have decided to put their two-week market rally that began with strong earnings and economic news on hold. After such a huge advance that saw major indexes climb more than 11%, the market has gotten more cautious.
A handful of disappointing earnings reports earlier in the week reminded investors that an economic recovery may not come as fast as hoped but they are still awaiting news from companies including oil producer ConocoPhillips COP, Royal Caribbean Cruises RCL and credit and debit card company Visa V.
Later in the week, companies including Walt Disney DIS, ExxonMobil XOM, Colgate-Palmolive CL and Dow Chemical DOW are scheduled to report second-quarter results.
Meanwhile, bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.66% from 3.69% late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.19% from 0.17% late Tuesday.
The dollar rose against other major currencies, while gold prices fell.
Overseas, Japan's Nikkei stock average rose 0.3%. In afternoon trading, Britain's FTSE 100 was up 0.9%, Germany's DAX index was up 1.9%, and France's CAC-40 was up 1.8%.