NEW YORK (CNN/Money) - U.S. stocks rose shortly after the open Tuesday, the first day of the trading month, bouncing back quickly after a report showing a drop in manufacturing activity in March initially spooked investors.

At 10:10 a.m. ET, the Dow Jones industrial average (up 43.63 to 8035.76, Charts), the Standard & Poor's 500 (up 5.61 to 853.79, Charts) index and the Nasdaq composite (up 7.72 to 1348.89, Charts) all registered modest gains. Monday, the S&P 500 slipped below the 850 mark, while the Dow dipped below 8,000.

While reports from the war in Iraq were still top of mind with investors, they also reacted to a key reading on the economy.

The Institute for Supply Management's highly awaited index of manufacturing activity for March showed a decline to 46.2, signaling contraction, from 50.5 in February. Economists surveyed by Briefing.com expected the index to decline to 49.

The report follows Monday's news that the Chicago Purchasing Manager's Index came in below 50, and well below economists' expectations.

Separately, the government said construction spending in February fell 0.2 percent, less than expected. Economists predict a 0.8 percent decline, compared with a 1.7 percent increase in January.

In corporate news, AMR (AMR: Research, Estimates), the parent of American Airlines, reached agreements with three unions in order to avoid a Chapter 11 bankruptcy filing.

Asian markets continued to react to the spreading of a pneumonia-type disease, named SARS, that has reportedly killed more than 60 people so far, and had a mixed day Tuesday. European stocks also were mixed.

Treasurys slipped, leaving the 10-year note yield down at 3.81 percent. The dollar bounced off recent lows against the yen and euro.

Brent oil futures for June delivery were down 35 cents to $26.20 a barrel in London. Gold retreated $1.50 to $35.40 an ounce in early trading.

Throughout the day, car makers will report March auto sales. Economists expect to see an annual rate of 5.3 million car sales, up from 5.2 million in February, but a decline in truck sales to a 6.8 million annual rate from 6.9 million.