NEW YORK (AP) — The stock market struggled for direction Monday afternoon as traders regrouped after a sharp sell-off late Friday.
Investors were keeping a close eye on interest rates in the bond market, which fell after an industry group reported an unexpected slowdown in U.S. manufacturing last month.
The Standard & Poor's 500 index wavered between gains and losses throughout the day. Other indexes were mixed in afternoon trading.
The Institute for Supply Management reported that U.S. manufacturing decreased last month for the first time since November. Its index measuring the manufacturing sector was the lowest since June 2009. Investors had expected an increase.
Some investors are betting that if the economy weakens the Federal Reserve will keep up its $85 billion a month in bond purchases. Speculation that the central bank was set to ease that stimulus, a major support for this year's rally in stocks, has caused trading to become volatile in the last two weeks.
The "good news is bad news" interpretation of economic reports may support stocks in the short-term, but at the end of the day the economy has to keep improving for stocks to reach new highs, Alec Young, a global equity strategist at S&P Capital IQ, said.
"This was a big miss on the ISM report," said Young. "Regardless of what it means for the Fed, ultimately you're buying a stream of earnings and you want to see the economy doing well."
With an hour of trading left, the S&P 500 index was up 2 points at 1,633, or 0.1 percent. The Dow Jones industrial average rose 73 points to 15,190, a gain of 0.5 percent.
The Dow got a boost from Merck, which shot up 4 percent after reporting encouraging results from a clinical trial for a skin-cancer treatment.
The Nasdaq composite, which is heavily weighted with technology stocks, fell nine point to 3,446.