NEW YORK, Dec 2: Wall Street shares closed lower on Friday after a gauge of manufacturing activity displayed a surprise contraction, raising fears that the US economic slowdown may be deepening.
The Dow Jones Industrial Average closed down 27.80 points (0.23 per cent) at 12,194.13.
The technology-laden Nasdaq composite finished down 18.56 points (0.76 per cent) at 2,413.21, while the broad-market Standard and Poor's 500 index sank 3.92 points (0.28 per cent) to close at 1,396.71.
Stocks fell after the Institute of Supply Management reported that US industrial activity contracted in November for the first time in over three years as the wider economy continued to moderate.
The ISM index of national industrial activity fell to 49.5 per cent from 51.2 per cent in October. The weaker reading caught Wall Street analysts off guard, as most market participants had expected the index to rise to 52.0.
Any reading under 50 indicates a contraction, so the report suggests the industrial economy has entered a downturn.
The first decline in manufacturing since 2003 may indicate that the problems in housing and motor vehicles are spreading, said Joel Naroff, chief economist at Naroff Economic Advisors.
The last time the index dropped below 50 was April 2003, just after the US-led military invasion of Iraq.
Slower growth with higher prices paid is a bad news combination for investors and decision-makers, Wachovia economists said in a note to investors.
Meanwhile Toyota overtook Ford in US vehicle sales for just the second month ever in November as the auto market remained stuck in low gear, industry figures showed Friday.
Japanese-based Toyota said its US sales rose 15.9 per cent to 196,695, ahead of Ford's November total of 182,259 vehicles.
Toyota's US-listed stock closed down five cents at $120.00 while Ford's stock finished down nine cents at $8.04 amid the wider market declines.
General Motors and Chrysler meanwhile posted modest year-over-year gains in domestic sales, but analysts said the market remained generally sluggish, partly as a result of a sputtering US economy.
GM finished up 46 cents at $29.69 while DaimlerChrysler ended 29 cents lower at $57.99.
Alcatel-Lucent, a telecoms equipment giant valued at 21.5 billion euros ($27 billion), meanwhile began life Friday after the merger of French group Alcatel and its former US rival Lucent.
The group will be second only to US-based Cisco Systems in the field of telecoms equipment but will also compete with Ericsson of Sweden and the future combination of Finnish and German groups Nokia and Siemens.
Lucent's stock closed Thursday at 2.55 dollars.
Traders said higher oil prices also contributed to Friday's stock declines.
New York's main contract, light sweet crude for delivery in January, rose 30 cents to close out the week at 63.43 dollars a barrel.
Bonds prices notched up hefty gains. The yield on the 10-year US Treasury bond fell to 4.425 percent from 4.458 per cent Thursday, while that on the 30-year bond sank to 4.541 per cent from 4.561 per cent. Bond yields and prices move in opposite directions.—AFP