NEW YORK - Wall Street declined Wednesday for the third straight session, with investors still unsettled about the economy and only somewhat relieved about falling commodities prices.
The Commerce Department gave the market just modest comfort when it said orders for manufactured products rose by 1.3 percent in July. The figure was higher than the 0.8 percent predicted by economists polled by Thomson Financial/IFR; the department also upwardly revised its June reading to an increase of 2.1 percent.
However, the report was shrugged off by many traders as old news, given that this is now early September. And with automakers expected to release sluggish August sales data later in the session and the Labor Department anticipated to report another drop in U.S. payrolls on Friday, trading was marked by caution.
A massive pullback in commodities since earlier in the summer has helped alleviate some of the market's inflation worries. Oil slid below $108 a barrel Wednesday as the dollar strengthened and Hurricane Gustav appeared to leave oil installations in the Gulf of Mexico largely undamaged.
But investors are realizing that oil is also falling because demand growth around the world appears to be waning. On Tuesday, stocks gave up a huge early advance only to close lower, as investors' enthusiasm about oil's selloff dissipated and gave way to concerns about the economy in the United States, as well as in other developed countries.
"All the data in the last two weeks has actually been very good," said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co., pointing to Wednesday's factory orders data, falling oil prices, and the recent upward revision of second-quarter gross domestic product. "Despite all that, you didn't get a commensurate market performance. And that's troubling."
In midday trading, the Dow Jones industrial average fell 83.78, or 0.73 percent, to 11,433.14, after moving in and out of positive territory.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 10.54, or 0.82 percent, to 1,267.04, and the Nasdaq composite index fell 23.91, or 1.02 percent, to 2,325.33.
Bond prices moved higher Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.72 percent from 3.74 percent in late trading on Tuesday.
The big economic headline of the week for Wall Street is likely to be the Labor Department's reading on August employment. The report is expected to show a drop in payrolls for the eighth straight month and another uptick in the unemployment rate.
The financial sector, which has played a big role in determining the direction of the stock market this year, was mostly higher on Wednesday.
Ambac Financial Group Inc. rose $1.69, or nearly 24 percent, after Wisconsin insurance regulators late Tuesday approved the bond insurer's plans for a new insurance subsidiary.
Many consumer product makers, however, have been hurting.
Corning Inc. fell $1.57, or 8.1 percent, to $17.93 after reducing its third-quarter sales and earnings-per-share outlook to reflect slower shipments of glass used in flat-screen televisions and computers.
Cell phone maker Nokia Corp. was also weak Wednesday, dropping 93 cents, or 3.8 percent, to $23.52.
Light, sweet crude futures fell $2.14 to $108.57 a barrel on the New York Mercantile Exchange.
While oil's drop should help consumers, it has taken a toll on a few companies — traders appeared a bit rattled about reports Wednesday that the hedge fund Ospraie Management is shuttering its largest fund due to significant losses in commodities.
Also troubling to investors is that a major reason behind the oil pullback is the anemic economies in the United States and abroad.
"We went from a weakening dollar, strong growth abroad regime to one that has a strengthening dollar and weak growth abroad," said Brian Gendreau, investment strategist for ING Investment Management. "People are trying to figure out what this means for their portfolios ... No one really has a comprehensive way of sorting this all out."
Small-cap stocks performed a bit better than others on Wednesday, as smaller companies tend to have less overseas exposure. The Russell 2000 index of smaller companies slipped 1.12, or 0.15 percent, to 737.39.
Declining issues outnumbered advancers by about on the New York Stock Exchange, where volume came to 442.1 million shares.
European indexes fell after a European Union report showed falling exports and lower household spending caused the euro economy to shrink by 0.2 percent in the second quarter.
Britain's FTSE 100 fell 2.15 percent, Germany's DAX index fell 0.78 percent, and France's CAC-40 lost 2.03 percent.
In Japan, the Nikkei stock index rose 0.64 percent.