Surprise slide in manufacturing sends stocks lower

NEW YORK — The stock market has ended a strong third quarter with trading that reflected investors' mixed emotions about the economy.

The major indexes closed slightly lower after zigzagging through the day. Prices got a lift from the government's latest reading on the gross domestic product, then plunged on news of a surprise drop in Midwestern manufacturing.

The Dow Jones industrial average ended down 30 points as investors remained uneasy about economic data and shifted bets as the dollar strengthened. The drop shaved only a modest amount from the Dow's 15 percent gain for the July-September period, its strongest quarter in 11 years.

The day's slide-and-bounce performance was a fitting one for the end of the quarter. When bad news hits the market, reminding investors of the economy's fragility, stocks slide. But within a few days, or even the same day, they start to recover as investors seem to grab hold of the fact that no one expects the recovery, or stocks, to have an unbroken path upward.

"Any legitimate decline in the market is just seen as a buying opportunity," said David Waddell, senior investment strategist and CEO of Waddell & Assoc. "That pattern has continued now ever since the rally began."

The slide that pulled the Dow down by more than 100 points in early trading began when the Chicago Purchasing Managers Index came in weaker than expected. Investors worried that the drop meant the national Institute for Supply Management index due Thursday also would be weak.

Not all the news rattled investors. The Commerce Department said the economy didn't sink as fast in the second quarter as it had estimated. The gross domestic product, which is the broadest measure of the economy, slid at a pace of 0.7 percent, rather than 1 percent as it had projected.

Stocks pulled off their lows as the dollar weakened. That makes U.S. goods cheaper to overseas customers and is seen as a boost for the U.S. economy.

Occasional squalls are to be expected after the quarter the stock market has seen. The Dow's gain was its biggest since a surge of 17.1 percent in the final quarter of 1998, when the dot-com bubble was still inflating. The rise was even stronger than the 11 percent jump the Dow logged from April-June.

According to preliminary calculations, the Dow ended down 29.92, or 0.3 percent, at 9,712.28 after falling as much as 134 points.

The broader S&P 500 index fell 3.53, or 0.3 percent, to 1,057.08. It rose 15 percent for the quarter after gaining 15.2 percent in the previous quarter. The index, which is the basis for many mutual funds, is up 56.3 percent since hitting a 12-year low in March.

The Nasdaq composite index fell 1.62, or 0.1 percent, to 2,122.42. It rose 15.7 percent for the quarter.

The Russell 2000 index of smaller companies fell 6.17, or 1 percent, to 604.28.

Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 1.8 billion shares compared with 1.3 billion shares traded at the same point Tuesday.