* ADP report shows unexpected cut in private payrolls
* Semis drag Nasdaq down after Morgan Stanley downgrades
* Costco falls after results, but Monsanto up
* Dow up 0.02 pct, S&P off 0.2 pct, Nasdaq off 0.8 pct (Updates to midday, changes byline)
By Chuck Mikolajczak
NEW YORK, Oct 6 (Reuters) - The Nasdaq fell on Wednesday after a broker's downgrade in the chip sector, while the Dow and the S&P 500 were flat as investors weighed the prospects for more stimulus measures following a weak reading on private-sector hiring.
The Nasdaq slid after Morgan Stanley downgraded semiconductor companies Xilinx Inc and Altera Corp to "underweight," citing concerns about a slowdown in Asian markets.
Xilinx lost 3.2 percent to $25.51. Altera fell 2.7 percent to $29.17. The PHLX Semiconductor Index, known as the SOX, slid 1.8 percent.
The poor showing in the ADP Employer Services report held the benchmark S&P 500 and the blue-chip Dow average in check, with ADP's data showing private employers cut 39,000 jobs in September as investors await Friday's employment report from the government.
"It's not a substantial market mover -- it's something we look at and we pay attention to, but it's not a big market mover, and it obviously did take a little bit of the luster off things this morning," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.
"So the real issue is what the (employment) report looks like on Friday, and that will be important because it will set the tone for quantitative easing, or Federal Reserve policy."
Stocks rallied to nearly a five-month high on Tuesday on increasing optimism that the Federal Reserve and other central banks will do even more to boost struggling economies worldwide after the Bank of Japan unexpectedly cut rates close to zero and said it would pour money into the markets through asset purchases.
The Dow Jones industrial average inched up 2.34 points, or 0.02 percent, to 10,947.06. The Standard & Poor's 500 Index shed 1.70 points, or 0.15 percent, to 1,159.01. The Nasdaq Composite Index dropped 18.00 points, or 0.75 percent, to 2,381.83.
Costco Wholesale Corp fell 0.9 percent to $64.06 after the largest U.S. warehouse club operator posted lower-than-expected comparable sales in September.
Monsanto Co shot up following its 2011 profit forecast, and Yum Brands Inc rose as much as 1.4 percent day after reporting adjusted third-quarter earnings that beat expectations by a penny.
At midday, though, Yum was up just 0.2 of a point, or almost flat, at $47 -- off the session high at $47.45.
Monsanto climbed 2.1 percent to $49.55. (Reporting by Chuck Mikolajczak; Editing by Jan Paschal)