Lackluster 'beige book' report sinks stocks

Investors cashed in some of their recent gains Wednesday after the Federal Reserve gave them more confirmation that the economic recovery is slowing.

The Dow Jones industrial average fell almost 40 points after the Fed released its regional survey of the economy, a report known as the "beige book." The Fed said economic growth has been steady during the summer in Cleveland and Kansas City but has slowed in Atlanta and Chicago. The central bank described economic activity elsewhere as modest.

The report had some sobering news about manufacturing, which had been one of the strongest parts of the economy. While manufacturing expanded in most of the Fed's 12 regions, about half - New York, Cleveland, Kansas City, Chicago, Atlanta and Richmond - said manufacturing had "slowed" or "leveled off."

Investors weren't surprised by the Fed report, but they also didn't like hearing their own downbeat assessment of the economy confirmed by the central bank.

The Dow fell 39.81 points , or 0.4 percent, to 10,497.88. The Standard & Poor's 500 index fell 7.71, or 0.7 percent, to 1,106.13, while the Nasdaq composite index fell 23.69, or 1 percent, to 2,264.56.- AP