Wall Street stocks were in rally mode again Tuesday, while European bourses were mixed after data showed that consumer inflation in the euro area fell in August and manufacturing activity began to soften.

Both the S&P 500 and Nasdaq finished at fresh records again, reflecting what analysts characterize as a "fear of missing out" on future gains as equities drift higher during a low-volume trading period.

Although US unemployment remains elevated and several sectors continue to experience great pain, analysts expect the recovery to lead to strong earnings growth soon in the wake of massive support from Washington.

The market expects record profits in the fourth quarter of 2021, said Howard Silverblatt, senior analyst at S&P Dow Jones Indices.

"If, for any reason, the market needs to change that belief, even if it is just a timing change, it will need to reprice, and given the profits are so concentrated, that could be ugly," Silverblatt said in a note.

In economic data, the Institute for Supply Management's manufacturing index rose more than expected in August, with key metrics continuing their expansion after business shutdowns caused by Covid-19 badly hit factories earlier this year.

In Europe, London fell sharply, while Frankfurt edged higher and Paris declined modestly.

The EU's Eurostat data agency said inflation stood at negative 0.2 percent.

That marked a steep slowdown from a positive 0.4 percent in July and was even further from the European Central Bank's official target of close to but just under 2.0 percent.

"The data released today put the ECB's challenge in stark relief," said Jack Allen-Reynolds, senior Europe economist at Capital Economics.

"Monetary policy in the eurozone will need to remain extremely loose for many more years to come," he added.

Meanwhile, a key barometer of economic activity, the PMI purchasing managers' index, suggested that eurozone industrial growth began to run out of steam in August, economists at Oxford Economics noted.

The PMI index for Germany was revised sharply downwards and the index for France remained in contraction territory, Daniela Ordonez and Nicola Nobile said in an analyst comment.

In Asia earlier, stock prices had been buoyed in part by a survey of Chinese manufacturing that indicated a pick up in activity, offering reassurance that the world's second biggest economy is recovering from the coronavirus pandemic.

Among individual companies, Walmart surged 6.3 percent after unveiling a long-discussed membership program to provide free delivery and compete directly with Amazon's popular "Prime" service.

Tesla shares fell 4.7 percent after announcing it would raise up to $5.0 billion with an offering of newly-issued shares. The pullback comes a day after a stock split following the electric car maker's surge this year.

Treasury Secretary Steven Mnuchin said Republicans would unveil a new stimulus proposal but hit out at Democrats for not wanting to compromise
Treasury Secretary Steven Mnuchin said Republicans would unveil a new stimulus proposal but hit out at Democrats for not wanting to compromise AFP / Brendan Smialowski

New York - Dow: UP 0.8 percent at 28,645.66 (close)

New York - S&P 500: UP 0.8 percent at 3,526.65 (close)

New York - Nasdaq: UP 1.4 percent at 11,939.67 (close)

London - FTSE 100: DOWN 1.7 percent at 5,862.05 (close)

Frankfurt - DAX 30: UP 0.2 percent at 12,974.25 (close)

Paris - CAC 40: DOWN 0.2 percent at 4,938.10 (close)

EURO STOXX 50: FLAT at 3,277.58 (close)

Tokyo - Nikkei 225: FLAT at 23,138.07 (close)

Hong Kong - Hang Seng: FLAT at 25,184.85 (close)

Shanghai - Composite: UP 0.4 percent at 3,410.61 (close)

Euro/dollar: DOWN at $1.1920 from $1.1936 at 2100 GMT on Monday

Dollar/yen: UP at 105.94 yen from 105.91 yen

Pound/dollar: UP at $1.3383 from $1.3370

Euro/pound: DOWN at 89.01 pence from 89.28 pence

Brent North Sea crude: UP 0.7 percent at $45.58 per barrel

West Texas Intermediate: UP 0.4 percent at $42.76 per barrel