Stocks pulled back today after economic data pointing to weakness in regional manufacturing and a slowing US economy weighed on investor sentiment in light trading ahead of the holiday weekend.

Stocks gained for a fifth straight session and the Dow Jones industrials achieved their third straight record close today after the Labour Department said falling gas prices helped push inflation lower last month.

Wall Street’s growing pessimism about the US economy sent stocks down for a second day in a row today, as investors lost the enthusiasm that followed Wednesday’s Federal Reserve’s decision to leave interest rates unchanged.

Wall Street fell sharply today after the Philadelphia Federal Reserve surprised investors by announcing that its broadest measure of manufacturing activity fell to a negative reading for the first time since April 2003, renewing investor fears that the economy could be cooling too quickly.

Stocks climbed in a seesaw session on Wall Street today, rising after the president of the Philadelphia Federal Reserve signalled the central bank could change its interest rate policy in the aftermath of Hurricane Katrina.

Investors adopted a cautious strategy today, cashing in more profits from the market’s recent rallies and giving the market’s major indexes their biggest losses in a month.

Leading shares were surging in opening deals, with the FTSE 100 testing the 3,900 point barrier as tobacco and oil stocks advanced, while positive news from Oracle overnight aided second-line technology stocks, dealers said. At 8.59 am, the FTSE 100 index was up 67.9 points to 3,903.1, having earlier touched a high of 3,907.2.

London shares edged higher in midmorning trades, underpinned by another positive session on Wall Street last night, and fuelled by a resurgence of interest in technology stocks following Dell's Q2 figures overnight, dealers said.

Shares in technology companies traded lower midsession, as investors continued to take their cue from the recent slew of negative news hitting the sector and as buyers widely continued to remain elusive, dealers said.

Sellers resurfaced on Wall Street late today, unloading stocks following the previous sessions’ buying binge.

US government bond prices continued lower in afternoon trade after the Philadelphia Fed business activity index rose sharply, breaking into positive territory for the first time in more than a year, dealers said.