Investors fret over
industrial report

NEW YORK >> A surprisingly weak reading on the manufacturing sector sent stocks mostly lower yesterday as investors feared that the economy has indeed run into a soft patch. The report overshadowed an improvement in consumers' view of economic conditions.

Investors were disappointed when the Purchasing Management Association of Chicago reported that its index of business activity in the Midwest area fell to 54.1 in May from 65.6 in April. In April, the index had fallen from 69.2 in March. A reading above 50 indicates expansion in the manufacturing sector, while a number below 50 indicates contraction.

The Chicago indicator is a closely watched barometer of manufacturing activity and is considered a precursor of the national assessment to be issued by the Institute of Supply Management today.

The news outweighed the positive effect from the Conference Board's consumer confidence index. That index rose to 102.2 in May from a revised 97.5 in April, above the 96 analysts expected.

The Dow Jones industrial average fell 75.07, or 0.71 percent, to close at 10,467.48.

Broader stock indicators also fell. The Standard & Poor's 500 index closed down 7.28, or 0.61 percent, at 1,191.50, and the Nasdaq composite index fell 7.51, or 0.36 percent, to 2,068.22.

Despite the day's lackluster trading, all of the major indexes advanced for the month, making up for nearly all the ground lost during the slump in April. The Dow rose 274.97, or 2.7 percent; the S&P added 34.65, or 3 percent, and the Nasdaq advanced 146.57, or 7.63 percent. Still, all three remain negative for the year.

Although Wall Street has rallied in recent weeks, it has also reacted nervously to economic indicators, unable to shake concerns that the recovery is faltering just as the Federal Reserve holds to its policy of raising interest rates. This week's indicators, which also include the government's employment report for May, due out Friday, are reviving some of the market's uneasiness.

"We've seen a good run in the market, and now it's pausing a little bit," said Scott Jacobson, chief investment strategist at Jefferies & Co. "The debate now is how far the Fed will go. Will the Fed drive the economy into a slow patch?"

Scott Wren senior equity strategist A.G. Edwards & Sons in St. Louis, said investors are still struggling through questions about how much the economic will slow, and what effect that may have on the market.