Financial markets drifted lower Tuesday afternoon even as reports showed the economy gaining strength. Crude oil prices sank, pulling Exxon Mobil, Chevron and other oil producers down. Investors were also looking ahead to major events later this week. The European Central Bank holds a meeting on Thursday, and a key U.S. jobs report comes out Friday.
At the close on Wall Street, the Dow Jones industrial average had fallen 31 points, or nearly 0.2 percent, to 17,067.6. The Standard & Poor's 500 index slipped 1.1 points, or nearly 0.1 percent, to 2,002.3. The Nasdaq composite rose 18 points, or nearly 0.4 percent, to 4,598.2.
ECONOMY: Two reports out Tuesday offered encouraging signs of U.S. economic growth. The Institute for Supply Management, a trade group, said its gauge of manufacturing reached 59 in August, the highest level since March 2011, buoyed by new orders for goods and increased production. Separately, the U.S. Commerce Department said that construction spending surged 1.8 percent in July, the biggest increase in more than 2 years.
REACTION: "It's clear we have a very solid economic expansion, but the stock market isn't buzzing much at all," said Anastasia Amoroso, Global Market Strategist at J.P. Morgan Funds. The explanation, she said, is that signs of solid growth raise the odds that the Federal Reserve will move to lift short-term interest rates. Rate increases typically slow stock markets down.
"We're moving closer and closer to higher rates," Amoroso said, "so strong economic momentum could actually put a damper on the market."
MORE TO COME: Traders will be focusing on the U.S. employment report for August due Friday. Investor confidence over the U.S. economy has risen after several months of strong growth in hiring and corporate profits and a series of major corporate acquisitions.
OIL: The price of crude oil slumped, pulling down shares of oil and gas companies. U.S. benchmark crude fell $3.02 to $92.97 a barrel in New York trading. Energy companies were the biggest losers among the 10 sectors in the S&P 500 index.
CRUISE-SHIP DEAL: Norwegian Cruise Line Holdings jumped 11 percent on the news that it had agreed to buy Prestige Cruises International for $3 billion. Buying Prestige will help Norwegian compete with its larger rivals: Carnival Corp. and Royal Caribbean Cruises. Norwegian Cruise Line's stock gained $3.68 to $36.99.
DRUG STRUGGLES: Exelixis lost more than half its value following news that the drug developer's potential treatment for prostate cancer fell short in late-stage research. The company's stock plunged $2.29, or 55 percent, to $1.85.