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High unemployment is considered the biggest hurdle to a stronger recovery because people worried about jobs have scaled back their spending. Consumer spending accounts for the bulk of the country’s economic activity.

The Philly Fed manufacturing survey was negative 7.7 for August after a reading of positive 5.1 last month. Economists were expecting the index to rise this month. Any reading above zero indicates growth in the sector.

It was an especially sobering report because manufacturing activity early this year had shown the most consistent signs of growth.

The report is “saying the manufacturing pop has run out of steam,” said Jim Peters, CEO of Tactical Allocation Group. The lift the economy got from companies replenishing inventories is over and sales have not picked up enough to maintain those levels, Peters said.

A report on future economic activity also fell short of expectations. The Conference Board’s index of leading economic indicators rose 0.1 percent last month after falling a month earlier. Economists had expected the index to rise 0.2 percent.

The index tries to predict economic activity over the next three to six months, so a rise in the index would indicate the economy is likely to grow during the second half of the year.

Chip maker Intel is buying computer-security software maker McAfee in an all-cash deal for $48 per share. McAfee shares surged $17.09, or 57.1 percent, to $47.02. Intel shares fell 61 cents, or 3.1 percent, to $18.98.

In other corporate news, Sears Holdings Corp. reported its second-quarter loss was cut in half as profit margins improved at its Kmart chain. But revenue at stores open at least a year, a key measure of strength in the retail industry, fell during the quarter. Sears shares dropped $5.36, of 8 percent, to $61.89.

Overseas, Britain’s FTSE 100 fell 1.7 percent, Germany’s DAX index fell 1.8 percent, and France’s CAC-40 dropped 2.1 percent. Japan’s Nikkei stock average rose 1.3 percent.