Wall St drops on poor manufacturing data

New York - US stock markets started December in the red on Monday after poor data on the manufacturing sector added to worries about the year-end onslaught of federal tax increases and spending cuts.

The Dow Jones Industrial Average slid 59.98 points to 12,965.60.

The S&P 500-stock index fell 6.72 to 1,409.46, while the Nasdaq Composite dropped 8.04 at 3,002.20.

Stocks pared opening gains after the Institute for Supply Management said its index on manufacturing activity for November fell into contraction territory, at 49.5, after two months of expansion.

Businesses the ISM surveyed blamed the slow global economy and uncertainty from the "fiscal cliff" battle in Washington, where politicians appeared to dig in their heels instead of attempting compromise on a budget-deficit plan that would avoid the drastic fiscal measures.

A budget proposal from Republicans in the House of Representatives "failed to spark optimism about bipartisan deal-making," said Andrea Kramer at Schaeffer's Investment Research.

News Corp fell 0.5% after announcing a new head of its troubled British newspaper arm News International and said it was ending its iPad-only news app, The Daily.

Las Vegas Sands Corp was up 0.2% to $46.75 a week before it closes the books on a special $2.75 a share dividend announced to beat the expected dividend tax increase that will come out of the Washington "fiscal cliff" talks.

Ford fell 0.4% after announcing solid November sales, up 6% from a year earlier.

General Motors, which announced only a 3% gain in November sales, tumbled 1.4%.

Toyota led the monthly race, with sales up 17% from a year ago. US-traded shares of the Japanese automaker slipped 0.5%.

Yahoo! dropped 1.2% after announcing it was ordered to pay $2.7bn by a Mexican court in a breach-of-contract lawsuit. The company denied the allegations and said it would appeal the decision.

Bond prices fell. The 10-year US Treasury yield rose to 1.63% from 1.61% on Friday, while the 30-year increased to 2.81% from 2.79%.

Bond prices and yields move inversely.