A day that started with euphoria over a $10 plunge in oil prices ended in disappointment Tuesday as Wall Street squandered an early 240-point surge on the Dow.

Today's Market

The Dow Jones Industrial Average closed down 26.63 points, or 0.23% to 11516.92, the Standard & Poor’s 500 fell 5.25 points, or 0.41%, to 1277.58 and the Nasdaq Composite lost 18.28 points, or 0.77%, to 2349.24. The FOX 50 rose 0.43 points, or 0.05%, to 915.40.

The rally topped out just minutes into the trading day and slowly faded, leaving many to question what happened to the day's gains. 

“The economy is not going to heal itself just because oil goes down $5 or $10. There are other things that need to happen for the rest of the market to go up just because oil is down," said Michael James, senior equities trader at Wedbush Morgan Securities in Los Angeles, citing a stabilization in the housing and credit markets. "I think that cold water got thrown on people's faces 15 minutes after the market opened.”

While the broader market enjoyed gains on the plunging oil prices, they were more than offset by diving energy names and slumping big-name tech stocks. Wall Street wasn't helped by a pair of weak economic reports on construction spending and manufacturing, news that reinforced the idea of a struggling economy. 

“We had a lot of euphoria and there was talk oil was going to break through $100. When that didn’t materialize, I think people took a lot of short term profits off the table," said Anthony Conroy, head trader at BNY ConvergEx. 

General Motors (GM) led the blue chips on Tuesday, jumping 6% on the falling oil prices. Home Depot (HD) and Bank of America (BAC) also enjoyed significant rallies to help lift the Dow. On the other hand, aluminum titan Alcoa (AA) and energy giant Chevron (CVX) were the index's biggest laggards as they were hurt by a commodities selloff. 

The Nasdaq Composite fared worse than the broader indexes, sliding almost 1% on the day. It's clear the index is still suffering from a Dell (DELL) hangover days after the tech giant warned of slower tech spending. Ebay (EBAY), BlackBerry maker Research in Motion (RIMM) and Apple (AAPL) all found themselves in the red by afternoon trading. 

Relief that Hurricane Gustav spared the Gulf Coast's energy apparatus pushed crude oil to an area unseen in five months: at one point down $10 on the day to $105.46 a barrel. However, crude erased some of those losses, closing down $5.75 a barrel to $109.71. As recently as July 4, crude had eclipsed $145 a barrel, sending gasoline prices to $4 a gallon. 

Despite the early positive news for the oil industry, the major oil companies emphasized that it was still too early to evaluate all of the oil rigs and refineries in the Gulf Coast. The region produces and refines 25% of the nation's oil. 

Gustav made landfall Monday morning as a Category 2 storm about 75 miles south west of New Orleans. The National Weather Service downgraded the storm to a tropical depression on Tuesday morning and it was recently near the Texas-Louisiana border.The other storm in the area -- Tropical Storm Hanna -- is expected to move up the coast of Florida and the Carolinas, avoiding the nation’s oil and refining capacity.

Plunging oil prices are typically positive catalysts for transportation stocks but weigh heavily on energy names. Not surprisingly, energy stocks were the biggest weights on the stock market on Tuesday, diving 5.5% as a group. The threat of oil falling below $100 a barrel sent shares of ExxonMobil (XOM) and Schlumberger (SLB) sharply lower. 

On the other hand, airlines were clearly the biggest winners, jumping almost 7% as a sector. Continental (CAL), United Airlines (UAUA) and American Airlines (AMR) enjoyed double-digit percentage gains.

Wall Street had a muted reaction to the day's major economic reports, which showed continued weakness in the nation's construction and manufacturing sector. The government said July construction spending fell by 0.6%, slightly more than the 0.3% economists had predicted.

The Institute for Supply Management, a private research group, said manufacturing activity in the U.S. declined slightly to a 49.9 reading last month. The reading, which was down from 50 in July, was in line with expectations. The ISM index indicates expansion when it eclipses 50. 

Corporate Movers

Lehman Brothers (LEH) failed to rally on the day even after state-owned Korea Development Bank acknowledged it is actively seeking a deal to acquire a stake in the embattled investment bank. KDB said it is mulling a deal with a consortium of private banks rather than going it alone. It’s not yet known how much of an investment KDB might purchase or at what price. Lehman has been under heavy pressure to raise cash ahead of more expected mortgage-related losses.

Google (GOOG) unveiled a new Web browser to compete with Microsoft's (MSFT) Internet Explorer. The open-source program, which will be called Chrome, is available for download on Tuesday. While Microsoft's Web browser has a huge lead in that field, Google's search engine is the dominant player in search. 

Alcatel-Lucent (ALU), the global telecom gear leader, named a pair of Europeans as its top two executives. Ben Verwaayen will take over as CEO and Phillipe Camus, a former co-CEO at EADS, was named chairman. The company has reported six straight quarterly losses since Alcatel, a French company, acquired Lucent, an American business, in November 2006.

Apple (AAPL) only added to rumors of a new line of iPod music players on Tuesday by inviting reporters to a “special event” in San Francisco called “Let’s Rock.” The tech giant said it will announce an unspecified new product at the press conference, which is to be held September 9.

Pfizer (PFE) is taking more of an “average guy” approach to its commercials for heart drug Lipitor following months of criticism over celebrity ads previously used for the blockbuster drug, The Wall Street Journal reported. The drug giant replaced Robert Jarvik, the inventor of an artificial heart who appeared in earlier commercials, with testimonials from heart-attack survivors in the new ads set to run on Tuesday, the newspaper reported. Critics had charged the original ads were misleading.

Global Markets

The Dow Jones Euro Stoxx 50 Index, which tracks the 50 largest companies in Europe, was up 38.60 points, or 1.15%, to 3403.00. 

In Asia, Japan's Nikkei 225 Index was down 224.71 points, or 1.75%, to 12609.47 while Hong Kong's Hang Seng was up 136.15 points, or 0.65%, to 21042.46.