Investors saw a disturbing trend in the Commerce Department's consumer income and spending report. While consumer spending rose by a solid 1 percent in July, incomes rose just 0.3 percent. People spent more than they earned for just the second time in 46 years, and the nation's savings rate fell to the lowest level ever recorded.

The nation's manufacturing sector also saw an unexpected slowdown, with the Institute for Supply Management's manufacturing index falling to 53.6 in August from 56.6 the previous month.

Yet the losses were minimal, and volume was extremely heavy for a market still struggling through Wall Street's summer doldrums — a sign that investors were still willing to buy stocks, even if they didn't quite know where to put their money, as reflected in volatile prices.

"I think the market's sending a very clear signal that it wants to move higher," said Ken Tower, chief market strategist for Schwab's CyberTrader. "What's happening in front of us right now is discouraging, but the market's telling us that these will be short-term disruptions."

The Dow Jones industrial average fell 21.97, or 0.21 percent, to 10,459.63 after posting a 68-point gain yesterday.

Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index rose 1.26, or 0.1 percent, to 1,221.59, and the Nasdaq composite index dropped 4.19, or 0.19 percent, to 2,147.90.

Bonds fell slightly after the previous session's rally, with the yield on the 10-year Treasury note rising to 4.03 percent from 4.01 percent late yesterday. The dollar fell against most major currencies, while gold prices rose.

Much of the worrisome disparity between income and spending can be blamed on record gasoline prices fueled by the sharp rise in crude oil futures this summer. Crude futures rose once again today, with a barrel of light crude settling at $69.47, up 53 cents, on the New York Mercantile Exchange.

In other economic news, the Labor Department said first-time jobless claims rose to a seven-week high of 320,000 last week, up 3,000 from the previous week. Unemployment claims are expected to rise significantly in the coming weeks due to layoffs spurred by Katrina.

While the economic data was troubling, the high trading volume showed investors were ready to find places to invest. However, their ability to make decisions was hamstrung by the debate over Katrina's economic impact. Oil prices, of course, have been surging, but there may be economic positives to come from the disaster as money is spent to rebuild.

"You've got a push-pull between tragedy and the good that can come out of it for the markets," said Jay Suskind, head trader at Ryan Beck & Co. "You've got to rebuild, and you're going to put money and resources into that and create jobs."

Leading the retail sales reports, Wal-Mart Stores Inc. reported a 3.3 percent increase in sales for August, just missing Wall Street's 3.4 percent forecast. The gains, however, were positive considering the nation's record gasoline prices, which hit Wal-Mart's lower-income customers disproportionately. Dow component Wal-Mart edged 4 cents higher to $45.

Bargain hunters sought out wholesalers and discounters in August, leading to strong sales, though investors weren't rewarding those stocks due to concerns about September's results. Target Corp., which saw a 6.3 percent jump in August sales, dropped 97 cents to $52.78, while Costco Wholesale Corp. fell 22 cents to $43.18 and BJ's Wholesale Club Inc. slid 85 cents to $27.70 even after both companies beat Wall Street's sales estimates.

In other news, drug maker Novartis AG added 44 cents to $49.19 after announcing a $4.5 billion cash takeover bid for Chiron Corp., the U.S. vaccine maker. Novartis already owns 42.2 percent for Chiron and said it will pay $40 per share for the rest of the company. Chiron surged 18 percent, or $6.49, to $42.93.

Advancing issues outnumbered decliners by nearly 5 to 3 on the New York Stock Exchange, where consolidated volume came to 2.28 billion shares, compared with 2.43 billion traded at the same point yesterday.

The Russell 2000 index of smaller companies rose 1.94, or 0.29 percent, to 668.46.

Overseas, Japan's Nikkei stock average rose 0.75 percent. In Europe, Britain's FTSE 100 closed up 0.6 percent, France's CAC-40 climbed 0.56 percent for the session, and Germany's DAX index gained 0.27 percent.