* ADP, ISM non-manufacturing data miss forecasts
* Applied Materials to buy Varian
* Indexes off: Dow 1 pct, S&P 1 pct, Nasdaq 1 pct (Updates to midday, changes byline)
By Caroline Valetkevitch
NEW YORK, May 4 (Reuters) - U.S. stocks fell on Wednesday as investors took profits in energy and other top-performing sectors for a third day, casting doubt on how much longer the market's rally may continue.
Adding to the bearish tone, economic data on private-sector jobs and the services sector were weaker than expected.
The S&P energy sector, which rose 34 percent since September, was down 2.2 percent on Wednesday, while materials fell 2.3 percent and industrials lost 1.6 percent.
Analysts said technicals for the overall market suggest further underlying support; however, investor sentiment appears to have turned more bearish, signaling at least a pause in the upward trend.
"There's been a scarcity of new lows (for indexes) ... all of this suggests the technical underpinnings for the market are fairly positive. But I wouldn't be surprised to see a period of sideways trading or profit-taking," said Michael Sheldon, chief market strategist, RDM Financial, Westport, Connecticut.
The S&P 500 is up 29 percent since the start of September.
Among Wednesday's data, the Institute for Supply Management's services index fell last month well below forecasts, while U.S. private employers added fewer jobs than expected in April, disappointing some who hoped for stronger growth ahead of Friday's key jobs report.
The news also created some worry the recent stock rally has reached levels that aren't supported by economic fundamentals.
"Friday's jobs report will be important," Sheldon said. "If we get a print of (200,000 job gains) or above, it will reinforce the idea the economy continues to expand." A Reuters poll forecasts non-farm job gains of 186,000 for the month of April and private payroll gains of 200,000.
The Dow Jones industrial average was down 123.36 points, or 0.96 percent, at 12,684.15. The Standard & Poor's 500 Index was down 13.85 points, or 1.02 percent, at 1,342.77. The Nasdaq Composite Index was down 28.30 points, or 1.00 percent, at 2,813.32.
It was a third day of losses for the S&P 500 and Nasdaq.
In deal news, chip equipment maker Applied Materials Inc is snapping up rival Varian Semiconductor Equipment Associates Inc for $63 per share to acquire new technology to meet stronger demand for smartphones and solar equipment.
Varian shares surged 51 percent to $61.23, and Applied Materials dipped 1.1 percent to $15.07.
ConAgra Foods Inc raised its bid for Ralcorp Holdings Inc to around $4.9 billion in cash. Shares of ConAgra rose 3 percent to $25.57 while Ralcorp, which owns the Post cereal brand, jumped 5 percent to $88. (Reporting by Caroline Valetkevitch; Editing by Kenneth Barry)