Reports of robust shopping over Thanksgiving weekend fueled earlier gains, but news on manufacturing short-circuited the market's advance. The Institute for Supply Management manufacturing index in November rose to 49.2, up from October's reading of 48.5. Economists were hoping that the index would tick above 50. A reading of 50 or more indicates expansion while a reading below 50 means contraction.
The ISM index's decline for the third straight month does not bode well for the stop-and-start economic recovery, some economists note. "The U.S. economy is not double-dip free. U.S. manufacturers have incurred a short-lived expansion followed by another contraction," says the economic research team at Moody's Investors Service.
The Dow Jones industrial average shed 33.52 points, or 0.38%, to 8,862.57, after posting triple-digit gains earlier in the session. The tech-heavy Nasdaq composite index finished higher by 6.04 points, or 0.41%, to 1,484.82. The broader S&P 500-stock index fell 1.79 points, or 0.19%, to 934.53.
Shares in major retailers like Wal-Mart (WMT
) who reported strong sales over the first weekend of the holiday shopping season helped contain the major indexes' retraction. Shares of price-focused chains like Wal-Mart, JC Penney (JCP
) and Target (TGT
) gained ground. And even high-end jeweler Tiffany (TIF
Wall Street remains jittery over the strength of the holiday shopping season. However, if sales the weekend after Thanksgiving -- the important kickoff to the season -- are any indication, the shorter-than-usual shopping season may not be as dire as many feared. Sales at U.S. retailers, with help from aggressive discounts and promotions, seem to be on track so far.
Meantime, tech stocks were helped by a Lehman Brothers upgrade of Intel (INTC
) to "overweight" from "equal weight". The firm also upgraded chip maker Advanced Micro Devices (AMD
) to "equal weight" from "underweight." Lehman cites signs of a slowly improving environment for technology demand for the raised ratings.
On Tuesday, investors will get a break from economic data. However, Wall Street will be scrutinizing AOL Time Warner (AOL
). Its executives will speak to analysts and investors about its plans to revitalize its America Online division.
U.S. Treasuries finished lower, but reversed some losses, as the latest ISM index update squashed an earlier stock rally. No major economic news are due until Wednesday when updates on ISM services, productivity and factory orders are announced.
European markets finished mixed as the U.S. equities rally faded. Datawise, a key gauge of the European Union's manufacturing health rose, consistent with evidence shown by other relevant surveys confirming exports have become the key to manufacturing growth, MMS says.
In London, the FTSE-100 index ended down 15.10 points, or 0.36%, to 4,154.30. Frankfurt's DAX index added 59.88 points, or 1.80%, to 3,380.20, after being up more than 4% earlier in the day. The Paris CAC 40 index finished lower by 27.89 points, or 0.84%, to 3,298.76.
In Asia, stocks ended mixed. Japan's Nikkei 225 Index closed off 41.09 points, or 0.45%, to 9,174.47, pulling back from last Friday's advance. In Hong Kong, the Hang Seng index added 135.29 points, or 1.34%, 10,205.16.