New York  - US stocks closed lower Tuesday, extending a decline amid investors' about financial shares despite signs the economy is improving.

US President Barack Obama on Tuesday said a report released showing that manufacturing is on the rise is a sign that the economy is improving.

"The steps we are taking to bring our economy back from the brink are working," Obama said.

The Institute of Supply Management released its report showing that production expanded for the first time in 19 months. Manufacturing had it's biggest two-month gain by rising by 52.9 per cent in August.

There have been indications in recent weeks that the US has been pulling out of its worst recession since the Great Depression of the 1930s, even as unemployment remains high.

Concerns that bank losses will continue pushed down financial shares led by American International Group (AIG), which lost 21 per cent to 36 dollars per share.

The blue-chip Dow Jones Industrial Average slipped 185.68 points, or 2 per cent, to 9,310.60. The broader Standard and Poor's 500 Index fell 22.58 points, or 2.2 per cent, to 998.04. The technology- heavy Nasdaq Composite Index dropped 40.17 points, or 2 per cent, to
1,968.89.

The US currency climbed against the euro to 70.34 euro cents from 69.78 euro cents on Monday and dropped against the Japanese currency to 92.94 yen from 92.96 yen. (dpa)