Stocks down again despite positive economic news

— -- Stocks trimmed their losses Monday after a report showed manufacturing grew at a faster pace in September than in August. Stocks initially followed European markets lower on the first day of the new quarter

European indexes fell broadly Monday on new concerns about the possibility of Greece defaulting on its bonds. The country's government said Sunday said that it will miss deficit reduction targets for the next fiscal year that it had agreed to as part of its bailout deal. Benchmark indexes in Germany, France, and Spain fell more than 2%.

Investors will be looking at a key U.S. manufacturing index and construction spending figures that will be released at 10 a.m. ET. Economists expect the Institute for Supply Management's September index to show that manufacturing activity barely grew for the third straight month. Construction spending figures are also expected to show that the industry continues to decline. Analysts are predicting that overall construction spending was about half of the $1.5 trillion pace that is considered healthy.

Concerns that the U.S. economy is headed for another recession helped send the S&P 500 index, the basis for most mutual funds that invest in U.S. stocks, down 14% over the three months that ended in September. It was the worst quarterly performance for the stock market since the financial crisis of 2008.

The Dow Jones industrial average dropped 240.60 points, or 2.2%, to 10,913.38 on Friday to close out the third quarter.

On Sunday, Greece's finance ministry said the deficit this year will likely be 8.5% of its gross domestic product, higher than the 7.8% previously anticipated, and blamed a deeper-than-expected recession for the failure. The Greek economy is projected to shrink 5.5% this year.

The revelation that Greece is finding it increasingly difficult to reduce its borrowings in spite of all its austerity measures has raised fears that international creditors will effectively pull the plug.

Without the latest 8 billion euro ($10.8 billion) loan, Greece has said it won't be able to pay all its bills starting in mid-October.

Greece has been reliant since May 2010 on regular loans from a 10 billion euro ($150 billion) bailout from other eurozone countries and the International Monetary Fund. It was granted a second 9 billion euro package in July, but the details of that deal are still being worked out.

Under the first bailout, Greece has to achieve certain targets in order to get the cash it needs to pay off its bondholders and pay salaries and benefits. Representatives of the so-called troika — the European Commission, European Central Bank and IMF— are in Athens now, trying to assess whether Greece has done enough to get its hands on the next batch of bailout cash.

Finance ministers from the 17 euro countries, including Greece's Evangelos Venizelos, are meeting later Monday in Luxembourg to assess the latest Greek developments.

"Greece continues to be the major source of market angst as we head into the final quarter of 2011," said Michael Hewson, market analyst at CMC Markets. "Today's meeting of finance ministers will continue to delay the inevitable and look at ways and means of avoiding a Greek default."

In Europe, Germany's DAX was down 2.4% at 5,372 while the CAC-40 in France fell 2.2% to 2,916. The FTSE 100 index of leading British shares was 1.9% lower at 5,030.