S&P 500 trims loss amid speculation Europe to take new steps

Uncertainty about future actions by the Federal Reserve and European leaders kept stock prices in check on Tuesday.

The Dow Jones Industrial Average, down more than 100 points in early trading, finished with a loss of 54.90 points to 13,035.94. The Nasdaq Composite Index gained 8.09 points to 3,075.06, and the S&P 500 Stock Index slipped 1.64 points to 1,404.94.

Investors are looking forward to several key employment reports due later in the week. In addition, the Fed will hold a two-day meeting next week and could announce new steps to stabilize the economy. A meeting of European officials on Thursday could also possibly result in actions in that region.

Gold closed at a five-month high, up $8.40 to $1,696 an ounce. Oil fell $1.17 to $95.30 a barrel.

Apple Inc. (Nasdaq: AAPL) climbed 1.5 percent amid speculation the company is close to introducing a new iPhone with a larger screen and thinner body. Morgan Stanley (NYSE: MS) added 3.4 percent after the shares were upgraded at CLSA Ltd. Netflix Inc. (Nasdaq: NFLX) slumped 6.4 percent as Amazon.com Inc. (Nasdaq: AMZN) reached a deal with pay-television channel Epix. Facebook Inc. (Nasdaq: FB) fell 1.8 percent to a record low after Morgan Stanley cut its price forecast on the company’s shares.

Equities fell earlier as the Institute for Supply Management’s U.S. factory index showed U.S. manufacturing shrank for a third month in August in the longest decline since the recession ended in 2009. A report over the weekend showed China’s manufacturing contracted at the fastest pace since March 2009.

“Economic data continues to be soft all over the world, and that’s just the basic reality,” said John Kattar, chief investment officer at Eastern Bank Wealth Management in Boston, which manages $1.7 billion. “But more important than that is speculation on what the ECB is going to do this week and what the Fed is going to do next week,” he said, referring to policy meetings by the European Central Bank and the Federal Reserve.

The S&P 500 rose 2 percent in August, capping its longest monthly rally since March, amid expectations global central banks would stimulate the economy. Fed Chairman Ben Bernanke said on Friday at an annual forum in Jackson Hole, Wyo., that he wouldn’t rule out steps to lower a jobless rate he described as a “grave concern.” Payrolls probably grew at a slower pace in August and unemployment exceeded 8 percent for a 43rd month, economists said before a report this week. The Federal Open Market Committee meets Sept. 12-13.

GameStop Corp. (NYSE: GME) advanced 7 percent, the most in the S&P 500, to $20.41. Goldman Sachs Group Inc. (NYSE: GS) raised the electronic game and software company to "buy" from "neutral."

Valeant Pharmaceuticals International Inc. (NYSE: VRX) rallied 15 percent to $58.78 after agreeing to buy Medicis Pharmaceutical Corp. (NYSE: MRX) for $2.6 billion. The drugmaker said Monday it will pay $44 in cash for each share of Scottsdale, Ariz.-based Medicis. Medicis surged 38 percent to $43.65.

ConAgra Foods Inc. (NYSE: CAG) rose 2.2 percent to 25.65, leading consumer staples in the S&P 500 to a 0.4 percent increase. The maker of Hebrew National hot dogs and Orville Redenbacher’s popcorn was raised to "overweight," the equivalent of "buy," from "neutral" at JPMorgan Chase & Co. (NYSE: JPM).

Caterpillar Inc. (NYSE: CAT) dropped 3.1 percent to $82.66. Cliffs Natural Resources Inc. (NYSE: CLF) slipped 6 percent to $33.68.

Alpha Natural Resources Inc. (NYSE: ANR) fell 6.9 percent to $5.53 while Peabody Energy Corp. (NYSE: BTU) dropped 3.4 percent to $20.90. The companies were cut to "hold" from "buy" at Dahlman Rose, which lowered its outlook for metallurgical coal used in steelmaking.

Nvidia Corp. (Nasdaq: NVDA) slid 6.4 percent to $13.28. The company was cut to "neutral" from "positive" at Susquehanna Financial Group LLP.

Jonathan Golub, chief U.S. equity strategist of UBS AG (NYSE: UBS), lowered his estimates for S&P 500 profits in 2012 and next year, citing a weaker outlook for the world’s largest economy, slower growth overseas, a strengthening dollar and a difficult operating environment for financial companies. His projection for combined earnings by companies in the benchmark equity index this year is now $102.50 a share, down from $103.50. He cut his estimate for profit in 2013 to $107 from $110.