NEW YORK, USA - STOCKS are wavering between losses and gains after reports that the US economy is weakening at a time when China and Europe are also slowing.

The Dow Jones industrial average was down 27 points at 13,064 yesterday afternoon. The broader S&P 500 index recovered from a loss earlier in the day and was up less than a point to 1,407. The Nasdaq composite rose 12 points to 3,079. The US stock market was closed Monday for Labour Day.

The biggest stock in the Nasdaq, Apple, rose US$9.01 to US$674.25, reversing course after being down four points earlier in the day. Apple invited reporters to a news event next week at which the company is expected to announce its long-awaited iPhone 5.

Heavy equipment maker Caterpillar was the weakest stock in the Dow average, slipping two per cent, or US$2.09, to US$83.24.

The Commerce Department reported that US construction spending fell 0.9 per cent in July from June, driven lower by a sharp drop on spending on home improvement projects.

The decline, the worst in a year, followed three months of gains powered by increases in home and apartment construction. New home construction rose again in July, but spending on home renovation projects fell 5.5 per cent.

A separate report delivered more gloomy news on the economy: the third straight month of contraction in US manufacturing. New orders, production and employment all fell in August. Factories have been a key source of jobs and growth since the recession ended in June 2009, but the sector been weak in recent months.

The Institute for Supply Management, a trade group of purchasing managers, says its index of manufacturing edged down to 49.6 from 49.7 in July, and the lowest reading in three years. A reading below 50 indicates that manufacturing is contracting.

"It's time to go back to school and sharpen up on stocks and pay attention to the numbers," said Kim Forrest, equity analyst at financial advisors Fort Pitt Capital Group. "The numbers show that there's a lot of weakness out there and investors have gotten lulled into complacency in the last month or so."

The week will culminate with US nonfarm payroll figures Friday, one of the most important barometers for the world's largest economy. Federal Reserve chairman Ben Bernanke has indicated that the central bank is inclined to provide new stimulus if it's needed.

Despite the gloom, Americans continued to buy cars thanks to model-year close-outs, low-interest financing and appealing new models. GM's August US sales rose 10 per cent compared with a year earlier, while Ford's rose 13 per cent and Chrysler's 14 per cent. Ford's stock rose 10 cents to US$9.44.

In Europe, Moody's warned that it could downgrade the credit rating of the European Union as a whole, citing the continent's lingering debt crisis. That sent markets broadly lower in Europe. Benchmark indexes fell 1.2 per cent in Germany, 1.6 per cent in France and 1.5 per cent in Britain.

The focus this week will be on the European Central Bank President Mario Draghi, who is expected to announce details on Thursday of a new bond-buying programme intended to bring down the borrowing costs of countries such as Spain and Italy.

The price of oil also slipped on worries that demand for oil would fall. US benchmark crude fell US$1.17 to US$95.30 in New York.

Among other stocks making big moves:

— Netflix plunged US$3.75 to US$55.97, a loss of six per cent. Rival Amazon signed a deal with a company that licenses movies from Paramount, MGM and Lionsgate for its online streaming service.

— Consol Energy fell four per cent after the company said it will temporarily idle a mine because of weak steel demand. The stock fell US$1.17 to US$29.01.