By Alexandra Scaggs 

U.S. stocks drifted higher Wednesday afternoon, as investors weighed a mixed bag of news on the economy.

The Dow Jones Industrial Average advanced 12 points, or 0.1%, to 16734. The S&P 500 index tacked on four points, or 0.2%, to 1928 and the Nasdaq Composite Index gained 19 points, or 0.5%, to 4253.

On Tuesday, the Dow slipped 21 points, or 0.1%, to snap a three-session win streak, and the S&P 500 eased less than 0.1%, failing to close at a record for the first time in four sessions.

Stock benchmarks started the day in the red but drifted higher in midday trading, as investors weighed mixed economic reports.

Many investors have been holding tight in their current positions or raising cash levels as the S&P 500 remains near its all-time highs. Wells Fargo Private Bank, which oversees $170 billion in client cash, recently raised its recommended cash level for its advisers. Mark Litzerman, head of equity research for the bank, said that the bank plans to invest that cash eventually, but it is holding back until it gets a clearer read on the economic outlook.

"One of the big conundrums for investors is, if you take money out of a certain asset class, where do you put it?" he said. "We're waiting to see how things play out with the economy this summer before we make a move."

Stock futures had pushed lower before the market's open after a disappointing report on the labor market. Data compiled by Automatic Data Processing and Moody's Analytics showed that 179,000 private-sector jobs were added in May, falling short of expectations of a 210,000 increase.

The report is seen as a preview of the government's May employment report Friday, which is expected show nonfarm payroll growth of 210,000.

Benchmarks then pared losses after a report on service-sector activity came in better than expected. The Institute for Supply Management's nonmanufacturing composite index for May came in at 56.3, above expectations of 55.2.

Despite the raft of data, trading remained relatively light on Wednesday, traders said. "The volume has been awful," said Michael O'Rourke, chief market strategist at JonesTrading Institutional Services.

Among other economic data released, the trade deficit for April widened 6.9% to $47.2 billion versus expectations of $40.9 billion. First-quarter productivity was revised to show a decline of 3.2% and unit labor costs increased 5.7%, close to expectations.

The yield on the 10-year Treasury note rose to 2.611%, after settling at a three-week high of 2.592% late Tuesday.

Gold futures were nearly unchanged, tacking on less than 0.1% to $1,244.50 a troy ounce, after snapping a six-session losing streak on Tuesday. Crude-oil futures rose 0.1% to $102.73 a barrel. The dollar rose against the euro and the yen.

European markets were mixed of the widely anticipated European Central Bank meeting on Thursday. The Stoxx Europe 600 was little changed, gaining less than 0.1%.

Economic data out of the euro zone continued to support expectations that the ECB will introduce new stimulus measures by either cutting interest rates or boosting liquidity through asset purchases. Data firm Markit said its composite purchasing managers index, which measures activity across both the manufacturing and services sectors, fell to 53.5 in May from 54 in April.

Asian markets were mostly lower, with China's Shanghai Composite falling 0.7% to suffer a fourth-straight decline. Japan's Nikkei Stock Average bucked the regional trend by tacking on 0.2%.

In corporate news, Dow component UnitedHealth tacked on 0.6% after the insurer increased its quarterly dividend by 34% to 37.5 cents a share, and renewed its share buyback program, which authorizes the company to repurchase 100 million shares over time.

Protective Life ran up 18% after Japan's Dai-ichi Life said it would buy the company in a deal valued at $5.7 billion.

Tibco Software slumped 6.3% after the company lowered its adjusted earnings and revenue outlook for the quarter ending June 1, citing weak sales of its analytics software called Spotfire.

Write to Alexandra Scaggs at alexandra.scaggs@wsj.com

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