A surprisingly weak reading on the manufacturing sector sent stocks mostly lower Tuesday as investors feared that the economy has indeed run into a soft patch. The report overshadowed an improvement in consumers' view of economic conditions.

Investors were disappointed when the National Association of Purchasing Management-Chicago reported that its index of business activity in the Midwest area fell to 54.1 in May from 65.6 in April. The Chicago indicator is a closely watched barometer of manufacturing activity and is considered a precursor of the national assessment to be issued by the Institute of Supply Management on Wednesday.

The news outweighed the positive effect from the Conference Board's consumer confidence index. That index rose to 102.2 in May from a revised 97.5 in April, above the 96 analysts expected.

The Dow Jones industrial average fell 75.07, or 0.7 percent, to 10,467.48. The Standard & Poor's 500-stock index dropped 7.28, or 0.6 percent, to 1191.50, and the Nasdaq composite index fell 7.51, or 0.4 percent, to 2068.22.

All three benchmarks advanced for the month.

Movers

American International Group, the insurance company being investigated over accounting issues, fell 85 cents, to $55.55. AIG filed its long-delayed annual report with the Securities and Exchange Commission, cutting its shareholders' equity at Dec. 31, 2004, by $2.26 billion, or 2.7 percent, to $80.61 billion.

Medco Health Solutions fell $2.20, or 4.2 percent, to $50 after the Wall Street Journal reported that the prescription benefit manager is resisting a federal subpoena from the Health and Human Services Office.

Mechel Steel Group, a major Russian mining and metals producer, rose 29 cents, to $26.69, after announcing that its board recommended a dividend for 2004 that is worth about $1.47 per U.S.-listed share.

Google rose $11.27, or 4.2 percent, to $277.27, after an analyst from Piper Jaffray raised the firm's price target on the stock.

Indexes

New York Stock Exchange composite index fell 50.57, to 7134.33.

American Stock Exchange index fell 2.24, to 1472.58.

Russell 2000 index of smaller-company stocks fell 0.19, to 616.71.

Volume

NYSE: 1.48 billion shares, up from 1.04 billion on Friday. Advancers narrowly outnumbered decliners.

Nasdaq: 1.67 billion shares, up from 1.25 billion. Decliners narrowly outnumbered advancers.

Commodities

Crude oil for July delivery: $51.97, up 12 cents.

Gold for current delivery: $416.30 a troy ounce, down from $419.90 on Friday.