NEW YORK Wall Street declined in skittish trading Wednesday, with investors still unsettled about the economy and only somewhat relieved about falling commodities prices.
The Commerce Department gave the market just modest comfort when it said orders for manufactured products rose by 1.3 percent in July. The figure was higher than the 0.8 percent predicted by economists polled by Thomson Financial/IFR; the department also upwardly revised its June reading to an increase of 2.1 percent.
However, the report was shrugged off by many traders as old news, given that it is now early September. And with automakers releasing sluggish August sales and the Labor Department anticipated to report another drop in U.S. payrolls on Friday, trading was marked by caution.
A massive pullback in commodities since earlier in the summer has helped alleviate some of the market's inflation worries. Oil slid below $109 a barrel Wednesday as the dollar strengthened and Hurricane Gustav appeared to leave oil installations in the Gulf of Mexico largely undamaged.
But investors are realizing that oil is also falling because demand growth around the world appears to be waning bad news for not only energy companies, but also for the technology and industrial sectors. On Tuesday, stocks gave up a huge early advance only to close lower, as investors' enthusiasm about oil's selloff dissipated and gave way to concerns about the economy in the United States and abroad.
"All the data in the last two weeks has actually been very good," said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., pointing to Wednesday's factory orders data, falling oil prices, and the recent upward revision of second-quarter gross domestic product. "Despite all that, you didn't get a commensurate market performance. And that's troubling."
In early afternoon trading, the Dow Jones industrial average fell 36.31, or 0.32 percent, to 11,480.61, after moving in and out of positive territory.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 7.48, or 0.59 percent, to 1,270.10, and the Nasdaq composite index fell 16.03, or 0.68 percent, to 2,333.21.
Bond prices moved higher Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.70 percent from 3.74 percent in late trading on Tuesday.
The big economic headline of the week for Wall Street is likely to be the Labor Department's reading on August employment. The report is expected to show a drop in payrolls for the eighth straight month and another uptick in the unemployment rate.
Many companies relying on consumer demand have been hurting.
Corning Inc. fell $2.02, or 10.4 percent, to $17.48 after reducing its third-quarter sales and earnings-per-share outlook to reflect slower shipments of glass used in flat-screen televisions and computers.
Cell phone maker Nokia Corp. was also weak Wednesday, dropping $1.19, or 4.9 percent, to $23.26.
Automakers were reporting dismal sales figures for the month of August, but lousy results were largely expected. Ford Motor Co., for one, said its August sales dropped more than 26 percent, but shares rose 6 cents to $4.57.
Auto sales have been knocked down in part by the soaring cost of gasoline.
Light, sweet crude futures fell 99 cents to $108.72 a barrel on the New York Mercantile Exchange.
But while oil's recent drop could help consumers, it has taken a toll on a few companies traders appeared a bit rattled about news that hedge fund Ospraie Management is shuttering its largest fund due to significant losses in commodities.
Also troubling to investors is that a major reason behind the oil pullback is the anemic economies in the United States and other developed countries.
"We went from a weakening dollar, strong growth abroad regime to one that has a strengthening dollar and weak growth abroad," said Brian Gendreau, investment strategist for ING Investment Management. "People are trying to figure out what this means for their portfolios. ... No one really has a comprehensive way of sorting this all out."
Small-cap stocks performed a bit better than others on Wednesday, as smaller companies tend to have less overseas exposure. The Russell 2000 index of smaller companies rose 1.44, or 0.19 percent, to 739.95.
The financial sector, which has played a big role in determining the direction of the stock market this year, was also mostly higher on Wednesday.
Ambac Financial Group Inc. rose $1.76, or nearly 25 percent, to $8.83 after Wisconsin insurance regulators late Tuesday approved the bond insurer's plans for a new insurance subsidiary.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 579.1 million shares.
European indexes fell after a European Union report showed falling exports and lower household spending caused the euro economy to shrink by 0.2 percent in the second quarter.
Britain's FTSE 100 fell 2.15 percent, Germany's DAX index fell 0.78 percent, and France's CAC-40 lost 2.03 percent.