Updated 12:25 p.m. ET

Stocks fell Tuesday after U.S. manufacturing declined in August to its lowest level since July 2009. Also in focus are a European Central Bank meeting later this week and U.S. employment numbers. The Dow was hovering around 13,000 and the S&P near 1,400.

The Dow Jones Industrial Average ($INDU) was down 93 points at 12,998. The S&P 500 ($INX) was down 8 points at 1,399. The Nasdaq Composite ($COMPX) was down 19 points at 3,048.

US data in focus ahead of Fed meeting
U.S. August manufacturing PMI fell slightly to 49.6 from 49.8 in July, the Institute of Supply Management reported. Economists expected the index to tick up to 50 from 49.8, according to Briefing.com. A reading below 50 indicates a contraction in manufacturing activity, while a reading above 50 indicates expansion. It was the third straight month of contraction.

July construction spending declined by 0.9%, the Commerce Department said. Economists had forecast a rise of 0.5%, according to Briefing.com, after a rise of 0.4% in June.

Car manufacturers have been releasing their U.S. car and truck sales for August. Sales are expected to increase by 16% to 20% overall, to an annual rate of 14.2 million vehicles, as better financing deals and an improving housing market encourage consumers to replace aging cars and trucks, Reuters reports. July figures were disappointing.

More U.S. economic reports are due throughout the week, with nonfarm labor data released Friday. Those numbers will be watched carefully, as they are likely to affect the Federal Reserve's decision regarding more stimulus. The Fed's next policy meeting is next week. On Friday, stocks rallied after Fed Chairman Ben Bernanke said there's room for more stimulus.

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But first, ECB meets
Meanwhile, however, the ECB is taking center stage at its next meeting Thursday. It's been some time since markets have anticipated the ECB's announcement of a bond-buying plan to help lower borrowing costs of distressed nations. Investors, however, worry ECB President Mario Draghi will fail to outline details of the plan until a better indication comes out of Germany.

Draghi did say late Monday the ECB could buy bonds with maturities of up to three years without violating its charter, fueling a massive rally by short-dated Spanish and Italian government debt on Tuesday, MarketWatch reported.

European stocks slipped ahead of the meeting after Moody's Investors Service warned that the European Union could lose its Aaa debt rating. Also affecting markets, the Swiss economy unexpectedly shrank in the second quarter, Reuters reports.

Asian markets declined Tuesday as well after Moody's downgraded its outlook on the European Union. It didn't help that China's official purchasing managers index fell below 50 for the first time since November 2011.

Stocks to watch
Campbell Soup (CPB) posted better-than-expected​ earnings, helped by higher soup sales. The company also gave an upbeat full-year outlook.

Smithfield Foods (SFD) reported 25% lower earnings of 40 cents per share, coming in below analyst expectations. The company cited growth in its packaged-meat business but poor performance of its fresh pork business dragged on profits, according to MarketWatch. 

Ford Motor (F) said U.S. sales in August rose by 13% from the same month a year ago, led by improved sales of the Focus and Fusion models. That was well above estimates of 7% to 10% sales growth. Ford sold 197,249 vehicles during the month, compared with 175,220 in August 2011. 

Chrysler reported its 29th consecutive month of year-on-year sales gains, with a 14% rise in August, above estimates.

General Motors (GM) said U.S. sales rose 10% in August as Buick, Chevrolet and Cadillac showed solid improvement. GM was expected to post 2% to 6% growth in vehicle sales. Total sales were 240,520 vehicles, up from 218,479 in August 2011. 

Shares of online video provider Netflix (NFLX) sank 10% after Amazon.com (AMZN) said it signed a multiyear licensing deal in the U.S. with Viacom's (VIA) Epix premium cable network to bring superhero blockbuster movies and thousands of other titles to Amazon's streaming video service. Just days ago, Netflix's exclusive deal with Epix expired.

Canada's biggest public drugmaker, Valeant Pharmaceuticals (VRX), will buy Medicis Pharamaceutical (MRX) for $2.6 billion in cash, its latest skin care deal in the U.S. this year. Medicis sells Dysport, an injection similar to Allergan's (AGN) Botox.