The ongoing debate about what kind of support the European Central Bank will provide for the region's troubled nations also affected investor sentiment.
The Dow Jones Industrial Average closed down 55 points, or 0.42%, at 13,036. The blue-chip index, which hasn't closed below 13,000 since Aug. 2, ran as low as 12,977 earlier in the session.
September is traditionally the poorest month for stocks, and the major U.S. equity averages are already on a two-week losing streak. The Dow lost 1.39% over the last half of August and finished the day up 6.7% so far in 2012.Losers outnumbered winners among the blue chips, 19 to 11. The biggest percentage decliners were Alcoa (AA), Caterpillar (CAT), du Pont (DD), Intel (INTC), Microsoft (MSFT), and United Technologies (UTX). Kraft Foods (KFT), Verizon (VZ), and Wal-Mart Stores (WMT) were among the Dow's best performers. The S&P 500 gave back nearly 2 points, or 0.12%, to settle at 1405, while the Nasdaq gained more than 8 points, or 0.26%, to finish at 3075. Volume remained tepid at 3.18 billion on the New York Stock Exchange and 1.51 billion on the Nasdaq. The weakest sectors were basic materials, conglomerates, and energy. Consumer non-cyclicals, health care and utilities were in the green. The biggest downer of the day from a data standpoint came courtesy of the Institute for Supply Management, which said its manufacturing index came in at 49.6 in August, below the 50 level that economists were predicting. Readings below 50 indicate a shrinking manufacturing sector. "The reading is largely in-line with global data but disappointing from a domestic perspective where the recovery remains illusive for now," said Andrew Wilkinson, chief economic strategist at Miller Tabak. Simultaneously, the Census Bureau reported that construction spending dropped 0.9% in July. A gain of 0.4% was expected. Over the Labor Day holiday weekend, according to reports, European lawmaker Jean-Paul Gauzès said ahead of the European Central Bank policy meeting Thursday that ECB President Mario Draghi in a closed hearing with the European Parliament Monday said he has "no problem with purchases on the secondary market for bonds of two to three years ... he said the ECB wouldn't be contravening the treaty in doing so."