Manufacturing slows, still above expectations

Growth cooled in the nation's manufacturing sector in July for the third straight month.

The manufacturing index fell to 55.5 last month from 56.2 in June, still above analysts' expectations but reflecting an economy that is growing more slowly, according to the Institute for Supply Management on Monday. Any reading above 50 indicates expansion.

During the past several months, the manufacturing sector has bolstered the economic recovery as the job market has struggled to expand. 

The July employment report is set for release on Friday.

U.S. markets — Dow Jones, NASDAQ and S&P 500 — were up about 2 percent through this afternoon, boosted by an increase in production and new orders as well as companies' increased willingness to hire new employees.

Federal Reserve Chairman Ben Bernanke was cautiously optimistic in a speech Monday, saying although the crisis is "mostly behind us," the nation still has a "considerable way to go to achieve a full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure and lost savings."

Another positive Monday was a revised manufacturing report for Europe, showing a faster-than-expected recovery for the 16 countries that use the euro. U.S. markets dropped off during the past few months on concerns over the European debt crisis.