Wall Street’s four-day surge came to a screeching halt on Wednesday as stocks tumbled on plunging commodities and renewed worries about deficit spending.

Today’s Markets

The Dow Jones Industrial Average fell 64.99 points, or 0.74%, to 8675.88, the Standard & Poor's 500 dropped 12.97 points, or 1.37%, to 931.77 and the Nasdaq Composite lost 10.88 points, or 0.59%, to 1825.92. The consumer-friendly FOX 50 tumbled 4.29 points, or 0.62%, to 685.82.

The markets enjoyed a late-day rally that pushed stocks well off their worst levels of the day. The Dow had been down as much as 141 points before an unprovoked last-minute round of buying halved those losses.

Still, Wednesday's tumble erased a chunk of the four-day rally that had added more than 400 points to the Dow. Aside from diving energy stocks and fears about the deficit, the markets were hurt by profit warnings from Valero (VLO) and Aetna (AET) and disappointing economic data.

“The broader tone of the market is setting us up for a little bit of a pullback," said Peter Kenny, managing director of Knight Capital Markets. "Yes, we have a problem with deficit spending. Oh, and by the way, we still have a macroeconomic picture that’s decelerating.”

New evidence that the economy is slowly healing had sent the Dow into the green for 2009 earlier this week and pushed the S&P 500 and Nasdaq Composite to new multi-month highs.

“Things had gotten pretty extended. Those that thought we were going to go right to 10,000 were misplaced. But the uptrend is still in tact,” said Michael James, senior equity trader at Wedbush Morgan Securities, who blamed the selloff on diving commodities.

More than half of the 30 components of the Dow closed with losses, led by Alcoa (AA) and DuPont (DD). Defensive stocks like Wal-Mart (WMT) and McDonald's (MCD) were some of the only advancing stocks on the index. 

“We had a big consolidation in May. We broke up at the turn of the month of May. Now we’re going into a retest of that breakout. Then I think we’re going to go higher,” said Nick Kalivas, vice president of financial research at MF Global. “I would be more alarmed if the Dow breaks through 8500. That would be a sign there are some serious problems technically.”

Energy Fuels Pullback

Energy stocks took the brunt of the damage on Wednesday, sliding almost 4% as a sector as crude oil plunged nearly $3. Individual names like XTO Energy (XTO) and Sunoco (SUN) tumbled even further. The sector was also hurt by Valero, which lost nearly one-fifth of its market value after warning of an unexpected second-quarter loss. 

Amid a rally for the greenback and a bearish inventory report, crude oil closed in the red for the second-straight day following six days of gains. Crude settled at $66.12 per barrel, down $2.43, or 3.54%. Gold backed away from $1,000 per ounce, sliding $18.70 per ounce, or 1.90%, to $964.50.

The market selloff was also related to ongoing concerns about the impact of deficit spending here and abroad, underscored by new testimony from Federal Reserve Chairman Ben Bernanke, who told lawmakers the U.S. can’t borrow indefinitely.

"We’re hearing well-coordinated and concerted concern about the impact of deficit spending globally and the impact on currency. That’s set a wet blanket on the party," said Kenny.

Data Dump

Wall Street was unimpressed with a trio of economic reports released Wednesday that showed the U.S. economy appears to be slowly healing, albeit at a slower pace than some had hoped.

The Institute for Supply Management's service sector index inched just moderately higher in May, rising from 43.7 to 44, but missing Wall Street's expectations. At the same time, the Commerce Department said U.S. factory orders grew 0.7% in April, shy of Wall Street's expectation for a 1% increase. Still, it's a big improvement from March when orders slid 1.9%. 

The data overshadowed the ADP report, which showed employers slashed a better-than-expected 532,000 jobs in May -- the fewest jobs lost since November. ADP said private-sector jobs remain at a five-year low and have declined for 16-straight months -- the longest streak since 2002.

Corporate Movers

Toll Brothers (TOL) beat the Street with an adjusted loss of 3 cents per share, compared to estimates for a loss of 50 cents per share. Toll said it sees signs buyers are beginning to “re-enter the new home market.” However, the luxury home builder, whose revenue plunged 51%, declined to issue guidance.

Hovnanian (HOV) narrowed its quarterly loss to $1.50 per share, topping estimates for a loss of $1.83 per share. Revenue tumbled 49% to $398 million.

American International Group (AIG) reached a deal to sell its main headquarters and an adjacent building in lower Manhattan, The Wall Street Journal reported. It’s not clear who the buyer is nor what the bailed-out insurer will receive for the buildings.

Aetna (AET) saw its shares tumble a day after the health insurer slashed its full-year guidance on higher medical costs for its commercial business unit. The company now sees earnings in the range of $3.55 to $3.70 per share.

Williams-Sonoma (WSM) suffered a 22% decline in net revenue last quarter, sending the kitchen appliance store to a loss of 14 cents per share. However, analysts had been bracing for a steeper loss and the company backed its full-year guidance.

World Markets

European stocks took a plunge, giving back some of this week’s rally. London’s FTSE 100 slid 2.09% to 4383.42, Germany’s DAX lost 1.74% to 5054.53 and France’s CAC 40 dropped 2.02% to 3309.65.

Asian markets stayed hot as Japan’s Nikkei 225 climbed 0.38% to 9741.67 and Hong Kong’s Hang Seng jumped 1.02% to 18576.47.