Stocks Slip Further After Weak Opening

All three major indices are losing points amid a manufacturing pullback and fresh turmoil in the financial sector.
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Updated from 10:33 a.m. EDT

Wall Street was falling Monday as U.S. investors, fresh off a positive month for the

S&P 500

and the

Nasdaq Composite

, pulled back as the U.S. manufacturing sector continued contracting and another financial-sector chief was shown the door.

The

Dow Jones Industrial Average

was down 135 points, or 1.1%, to 12,504, and the S&P was dropping 12 points, or 0.9%, at 1388. The Nasdaq was off 31 points, or 1.2%, to 2492.

The declines came even though the Institute for Supply Management put its national factory-activity index at 49.6 in May -- a full point higher than the prior month and better than the consensus estimate. Still, that was a bit below the break-even level of 50.

Ian Shepherdson, chief U.S. economist with High Frequency Economics, wrote that a healthy pickup in export orders is helping to boost overall orders, but that the gains aren't strong enough to halt losses of manufacturing jobs. The export strength, he said, "is dead in line with the performance implied by the weakening of the dollar over the past year and will likely persist for a few more months yet."

"Overall, soft but not catastrophic," said Shepherdson, "but remember this is a deeply atypical, consumer-led downturn."

Meanwhile, the Commerce Department said construction spending was down just 0.4% in April, a little ahead of the 0.6% consensus. Data from March was revised to minus 0.6% from the originally released negative 1.1%.

Among stocks,

Wachovia

(WB) - Get Report

said that CEO Ken Thompson has been

forced out

by the board a few weeks after the bank disclosed that its first-quarter loss was 80% higher than it had originally reported. Thomson had been stripped of his chairman title in the wake of those losses. Shares were down 3.2%.

Elsewhere in the financial space,

Washington Mutual

(WM) - Get Report

announced that it will be

splitting its chief executive and chairman roles

. Stephen Frank will assume the chairman spot, while Kerry Killinger remains CEO. The stock was off fractionally to $8.99.

Also,

TheStreet.com

has learned that

Google

(GOOG) - Get Report

may

delay the release of its Gphone

to 2009, according to a source familiar with the situation. Shares of Google surrendered 1.7%.

The decline in U.S. stocks came also amid suffering European exchanges as Britain's largest lender to landlords,

Bradford & Bingley

, sliced the price of its rights offering and stoked fears that credit-related losses are continuing to spread.

Recently, the FTSE 100 lost 0.7%, the Germany's Xetra Dax sank 1.1%. The Paris Cac plunged 1.5%. Asia markets fared better, however. Tokyo's Nikkei 225 climbed 0.7% overnight, and Hong Kong's Hang Seng Index jumped 1.2%.

That came as mobile operator

China Unicom

(CHU) - Get Report

announced it will

take out

fixed-line provider

China Netcom

(CN) - Get Report

in a stock swap worth $23.8 billion (185 billion Hong Kong dollars).

Back in U.S. companies, shares of

Marriott International

(MAR) - Get Report

gave up 1.8% after the hotel operator said it now expects revenue per available room to grow just 2% in the second quarter, down from its prior forecast of 3% to 5%.

Meanwhile, fertilizer concern

Intrepid Potash

(IPI) - Get Report

said its fiscal first-quarter earnings quintupled from last year to $33.1 million on sales that ramped up 75% at $84.4 million. Still, the stock lost 1.2%.

Elsewhere, the

Financial Times

reported that Japan-based carmaker

Toyota

(TM) - Get Report

is considering shaving down its U.S. revenue guidance amid dwindling sales of its larger vehicles. Toyota shares were up slightly at $102.45 on the

NYSE

.

In notable analyst actions, insurance firm

Progressive

(PGR) - Get Report

had its rating raised to outperform at Friedman Billings, and Keefe Bruyette upgraded

Sovereign Banc

(SOV)

. Logging company

Weyerhaeuser

(WY) - Get Report

was cut to hold from buy at Deutsche Bank.

Progressive shares bumped up 2.2% as Sovereign added 3 cents at $9.17. Weyerhaeuser shares lost 1.4%.

Friedman Billings also boosted the price targets of several coal producers, among them

Peabody Energy

(BTU) - Get Report

,

Patriot Coal

(PCX)

and

Arch Coal

(ACI) - Get Report

. Shares were up between 4.8% and 8.4%.

As for commodities, crude oil shed a penny to $127.34 a barrel. Gold futures were up $5.10 to $892.40 an ounce. The U.S. dollar firmed by 0.1% against the euro and added 0.8% to the British pound, while yielding 0.9% to the yen.

Treasury prices were rising. The 10-year note added 12/32 in price to yield 4.01%, and the 30-year bond was up 8/32 in price, yielding 4.70%.