updated 11/4/2008 7:14:22 AM ET 2008-11-04T12:14:22

Wall Street ended the calmest session in recent memory with a narrowly mixed performance Monday as investors largely looked past a weak reading on the manufacturing sector and focused on the election.

Major Market Indices

Before finishing essentially flat, the Dow Jones industrials moved in a range of less than 140 points — well below October’s average daily swing of 594. While trading was quiet, including the often-volatile final hour, the calm doesn’t necessarily mean the market has overcome all its worries; analysts said investors weren’t making big moves ahead of the voting.

Stocks showed little lasting impact from the Institute for Supply Management report that its measure of U.S. manufacturing dropped last month to the lowest level since September 1982 as credit conditions tightened and disruptions remained from Hurricane Ike. The trade group said its index of manufacturing activity fell to 38.9 from 43.5 in September, well below the 41.5 economists predicted, according to Thomson/IFR.

A separate report showed construction spending fell by a smaller-than-expected amount in September as a rebound in nonresidential activity helped offset further weakness in home building. The Commerce Department said construction spending fell by 0.3 percent in September, less than the 0.8 percent decline many economists expected.

Major auto companies reported weak sales for October on Monday as tight credit and nervousness about the economy kept consumers away from showrooms. General Motors Corp.’s U.S. sales plunged 45 percent, Ford Motor Co.’s sales fell 30 percent, while Toyota Motor Corp.’s dropped 23 percent.

The range of data support the growing belief that the economy is in recession, hurt by a drop in lending and slower overall spending. But with the Dow having tumbled more than 14 percent in October — its worst month in 21 years — the market has priced in a significant falloff in economic activity. Wall Street must now determine whether the selloff in stocks is adequate, not enough or overdone.

Stephen Massocca, co-chief executive of Pacific Growth Equities, said the economic readings weren’t a surprise given the hits the economy has taken from the evaporation of lending since September. He said Wall Street’s tepid reaction also reflects the market’s process of forming a bottom after its selloff. Investors are also waiting to make big bets until after the election, he said.

In addition, the fiscal year for mutual funds ended Friday, removing one source of selling pressure from the market. Some funds had been selling last month ahead of Oct. 31 for tax purposes and to raise cash.

“What we’ve seen was a rally last week taking a dire depression off the table, and I think now what we have is a severe recession,” Massocca said. “By and large, the economy is bad but it’s not as bad as many people think it is. There are still people going to work every day.”

The Dow Jones industrial average fell 5.18, or 0.06 percent, to 9,319.83, after rising as much as 86 and falling 70. The day’s trading range was its lowest since Sept. 3.

Broader stock indicators were mixed. The Standard & Poor’s 500 index fell 2.45, or 0.25 percent, to 966.30, while the Nasdaq composite index rose 5.38, or 0.31 percent, to 1,726.33.

The Russell 2000 index of smaller companies rose 0.98, or 0.18 percent, to 538.50.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to a light 1.02 billion shares.

The quiet session wasn’t a surprise as many investors sat on the sidelines ahead of the election. Many analysts have said that in general, neither candidate is more favored than the other on Wall Street, but investors are eager to put the uncertainty behind them.

John Dorfman, portfolio manager of the Dorfman Value Fund, noted that even with a difficult economy the market has priced in a tough recession.

“I think we are groping for a bottom here and there is often a relief really after the election is resolved,” he said.

Given how far stocks have already tumbled, some analysts believe the market is showing signs of bottoming but that volatility likely will remain. Last month, for all its problems, did end with a positive tone, thanks in large part to weeks of gradual improvement in the tight credit markets, but also because mutual funds were finished with selling at the end of their fiscal year. The Dow added 11.3 percent last week, its best weekly performance in 34 years, while the S&P 500 index climbed 10.5 percent.

Still, the Dow is down 34.2 percent from its Oct. 9, 2007, record close of 14,164.53, while the S&P 500 is down 38.3 percent from its October 2007 peak of 1,565.15.

Craig Peckham, market strategist at Jefferies & Co., remains cautious. He said the market is still trying to determine how long the slowdown will last and if it will be longer than normal slowdowns, which he suspects it will.

“There continues to be risk to equity values particularly if we have a long-term downturn,” said. “I think we probably do end up bouncing around for a while and I think real conviction to the upside or the downside won’t come until people get better visibility on 2009.”

The key bank-to-bank lending rate known as Libor was unchanged with Friday’s rate of 3.03 percent for three-month dollar loans. A fall in the London Interbank Offered Rate indicates that banks are more willing to lend to one another.

Investors’ demand for short-term government debt remained high, however, a sign that they are still cautious. The yield on the three-month Treasury bill, seen as one of the safest assets around, rose to 0.47 percent from 0.43 percent Friday. A higher yield indicates decreased demand.

The yield on the benchmark 10-year Treasury note fell to 3.91 percent from 3.96 percent late Friday.

The dollar rose against most other major currencies. Gold prices also rose.

Light, sweet crude fell $3.87 to settle at $63.91 a barrel on the New York Mercantile Exchange.

Overseas, Britain’s FTSE 100 rose 1.51 percent, Germany’s DAX index rose 0.78 percent, and France’s CAC-40 advanced 1.17 percent. Hong Kong’s Hang Seng Index climbed 2.69 percent. Japan’s stock market was closed for a holiday.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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