Updated from 4:07 p.m. EDT

Stocks closed mixed Monday as a strong manufacturing report appeared to raise worries that the Federal Reserve now has more reason to continue its rate-hiking campaign to help keep inflation under control.

The Dow Jones Industrial Average closed down 33.22 points, or 0.31%, to 10,535.48, while the S&P 500 lost 2.11 points, or 0.17%, at 1226.70. The Nasdaq gained 3.74 points, or 0.17%, to 2155.43. The 10-year Treasury was down 16/32 in price to yield 4.39%, while the dollar rose against the yen and euro.

"It was certainly a day focusing on inflationary data," said Art Hogan, chief market analyst with Jefferies. "My guess is that we'll have more shifting to corporate news. We have a full shift now that the fourth quarter is starting to search for catalysts."

About 1.55 billion shares traded on the New York Stock Exchange, with advancers beating decliners by a 6-to-5 margin. Trading volume on the Nasdaq was 1.83 billion shares, with advancers outpacing decliners 8 to 7.

"This is a market that has made new four-year highs several times this year, but only marginally," said Ken Tower, chief market strategist with CyberTrader. "We're still in an uptrend, but it's very shallow overall."

Crude oil for November delivery finished down 77 cents to $65.47 a barrel, and unleaded gasoline futures lost 3 cents to $2.06 a gallon. Front-month crude is up about 1.1% since last Tuesday's close, as heating oil and natural gas contracts have rallied.

Monday began the last quarter of 2005 with the Institute for Supply Management's manufacturing index for September, which unexpectedly rose to 59.4 from 53.6 in August. Economists expected the ISM index to fall to 52.0.

"This is astonishing," said Ian Shepherdson, chief economist with High Frequency Economics. "Other surveys had suggested companies were dealing with the shock of Katrina and its attendant surge in energy prices better than consumers. One month does not prove anything, but the trend in the headline index has been strengthening since the middle of the year."

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