The Dow Jones Industrial Average ended 13.13 lower at 9,345.70, breaking two days of gains. The blue-chip index opened higher after European stocks scored strong overnight gains and Washington released an economic report that indicates new strength in the manufacturing sector.

The Dow waffled at mid-morning but regained its strength, moving as high as 9430.66, up nearly 72 points from Friday's close, only to retreat a second time in the final 20 minutes.

And although the Nasdaq composite managed to push to a record high again, the Standard & Poor's 500 composite ended lower.

The Dow industrials were led higher by AT&T;, after the telecommunications giant announced a deal to provide telephone service over Time Warner's existing cable television systems. Time Warner shares rose as well.

The Dow components were also supported by Hewlett-Packard, whose shares rose sharply after that company introduced a new line of printers.

Stocks opened higher after a strong showing in overnight trading in Europe, and after Washington released data showing that consumers earned and spent more money last December. The Commerce Department reported that Americans' personal income climbed 0.5 percent that month, while personal spending surged 0.8 percent.

At 10 a.m., the market got another boost as the National Association of Purchasing Management reported that its index of manufacturing activity rose to 49.5 percent in January from 45.3 percent in December.

Although a reading under 50 percent is a sign of contraction in the industrial sector, the increase was bigger than economists had expected, and it sent manufacturing shares higher. Among Dow components, for example, General Motors rose more than 3 points.

The purchasing data represented "a very strong rebound" in manufacturing, said Anthony Karydakis, senior financial economist at First Chicago Capital Markets, Inc. Combined with last week's report on strong gains in durable-goods orders, and a strong report from the Philadelphia area on manufacturing activity, "shows a manufacturing sector making a comeback," Karydakis said.

But Tuesday's meeting of Federal Reserve policy makers dampened Wall Street's enthusiasm, said Barry Berman, head stock trader for Robert W. Baird & Co. in Milwaukee.

"The Fed is kind of stuck," Berman said, between an impulse to cool the stock market down because its high-flying advances could prove inflationary, and the realization that any action that would send the market lower could slow consumption and have grave consequences for the economy.

The Fed is "taking the stock market into consideration more than they ever have as a factor in everybody's economic well-being," Berman said. "It's gotten to be a bigger part of everybody's wealth, and as such, if people were to suddenly lose a portion of that, it would affect their spending habits, which would affect the market."

Meanwhile, some merger news helped individual names.

Rohm & Haas agreed to buy salt processor Morton International in a transaction worth $4.9 billion. Morton's shares shot higher, and Rohm & Haas's rose as well.