Stocks Slip as Quarter Ends

The outlook for economic growth also took a blow at Goldman Sachs, which reduced its projection for 2008 U.S. gross domestic product to 1.8%.

Dennis Lockhart, president of the Atlanta Fed, said during a speech that he foresees a "soft landing" for the economy, but that more turbulence could await. William Poole, who runs the St. Louis Fed, argued that the bank did the right thing in cutting rates by 50 basis points earlier this month, but he said investors shouldn't simply assume more easing is assured.

Meanwhile, there was a torrent of data to contend with. The Commerce Department said personal income rose 0.3% last month, slightly below expectations. Consumer spending was up 0.6% in August, greater than the 0.4% forecast. On the positive side, the year-over-year reading on the core deflator fell 0.1 percentage point to 1.8%.

"The Federal Reserve closely watches the price index for personal consumption expenditures, less food and energy," said Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission, in an emailed statement.

"Oil and other commodity prices continue to surge on international markets, and this is likely to feed U.S. inflation," he added. "The Federal Reserve, by constraining U.S. economic activity, can do little to slow rising commodity prices, and will likely continue to focus on stabilizing credit markets and avoiding recession."

Also on the docket, the Chicago purchasing managers' index, a measure of Midwestern factory activity, rose to 54.2 this month from 53.8 in August. Analysts had anticipated a slight decline.