By Richard Leong
NEW YORK, July 24 (Reuters) - U.S. stock prices edged lower on Wednesday on disappointing results from Caterpillar and AT&T, overshadowing robust earnings from Apple, while the dollar strengthened on data showing a pick-up in domestic manufacturing and new home sales.
News of surprise improvement in U.S. and European factory activity offset further signs China's economy is cooling. Data showing the Chinese manufacturing sector contracting for a third straight month spurred selling in oil.
Better outlooks for the United States and Europe caused investors to reduce their safe-haven holdings in U.S. and German government debt, while gold snapped its four-day winning streak on profit-taking.
Initial estimates of manufacturing activity across the 17-nation currency bloc showed the region on course to end its 18-month old recession, led by an upsurge in activity in German and French factories.
'The improvement in manufacturing (in Europe) was driven by Germany and the periphery economies, indicating that the region's long, drawn-out recession may be coming to an end,' said Boris Schlossberg, managing director of FX Strategy at BK Asset Management in New York.
Across the Atlantic, Markit's 'flash' U.S. Manufacturing Purchasing Managers Index rose to 53.2, a four-month high, while output also was at its strongest since March.
Investor sentiment was also boosted by a U.S. government report showing that new home sales rose to a five-year high in June even in the wake of higher mortgage rates.
The encouraging data from the United States and Europe offset worrisome news from China. A survey of its vast manufacturing sector showed Chinese activity slowed to an 11-month low in July, suggesting the world's second-biggest economy was still losing momentum.
After opening higher, U.S. blue-chip stocks turned lower, while the Nasdaq Composite Index held its gains.
The Dow Jones industrial average was down 3.52 points, or 0.02 percent, at 15,564.22. The Standard & Poor's 500 Index was down 0.81 points, or 0.05 percent, at 1,691.58. The Nasdaq Composite Index was up 18.58 points, or 0.52 percent, at 3,597.85.
Shares of heavy equipment maker Caterpillar fell 2.2 percent to $83.64 after it reported lower quarterly profits and reduced its outlook for full-year earnings.
AT&T stock shed 1.6 percent to $35.35 after the No. 2 U.S. mobile service provider reported quarterly profits that missed forecast despite better-than-expected revenues.
Caterpillar and AT&T are components of the Dow and S&P 500.
Europe's broad FTSEurofirst 300 index was up 0.6 percent at 1,213.87, receding from an earlier 0.9 percent gain.
Its initial gains were bolstered by a 0.9 percent rise in technology stocks on the back of Apple's forecast-beating results posted after the U.S. market closed on Tuesday. Apple shares were up 5.9 percent at $443.87, their highest level since June 10.
Shares in British chip designer ARM Holdings, which designs chips used in mobile computers and telephones, including Apple's iPhone, also benefited, rising 5.0 percent.
MSCI's world equity index was flat on the day though still near a five-year high. It was last up 0.03 percent at 376.15, held back partly due to weakness in Asian shares on concerns over China's outlook.
The better prospects for the U.S. economy supported the greenback, which rose 0.8 percent to around 100 yen, moving away from a one-week low of 99.13 yen touched on Tuesday.
The dollar index rebounded after skidding to a one-month low of 81.926 on Tuesday. It was last up 0.21 percent at 82.113.
A strong dollar stoked profit-taking in gold, which hit a one-month high earlier this week. Spot bullion prices fell 1.1 percent at $1,332.94 an ounce.
The latest euro zone factory data sent the euro to a one-month high against the dollar past $1.3256 before pulling back slightly to $1.3230, up 0.08 percent on the day.
The improved outlook for the United States and Europe reduced the safe-haven appeal of low-risk Treasuries and Bunds.
Benchmark U.S. 10-year government notes fell 23/32 in price to yield 2.5927 percent, while German Bund futures were down more than 1 point at 142.76.
In the oil market, traders were focused on the weak Chinese data as the world's No. 2 economy has been a major importer of raw materials, supporting prices in recent years.
Brent oil was down $1.07 to $107.35 a barrel and U.S. crude lost $1.18 to $106.05.
(Additional reporting by Angela Moon, Rodrigo Campos, Nick Olivari in New York; Richard Hubbard, Jan Harvey in London; Editing by Dan Grebler)
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