New orders for factory goods fell for the second time in three months in August, putting into question strength in the manufacturing sector which had led the economic recovery.

The Commerce Department said on Tuesday orders for manufactured goods decreased 0.2 percent, failing to meet economists' expectations of a flat reading.

Concerns that the United States might slip back into recession had eased slightly on Monday after the Institute for Supply Management said national manufacturing activity rose in September.

But economic growth, which slowed sharply in the first half of the year, still looks vulnerable to an escalation of the European debt crisis.

U.S. stocks tumbled and the S&P 500 entered bear market territory as European officials postponed a vital aid payment to debt-stricken Greece.

Federal Reserve Chairman Ben Bernanke said on Tuesday the U.S. central bank was prepared to do more to help the economy.

The Commerce Department report showed orders excluding transportation decreased for the first time in six months, also falling 0.2 percent.

Orders for transportation equipment dropped 0.1 percent in August as demand for motor vehicles fell 5.3 percent. Civilian aircraft orders rose 23.5 percent.

Unfilled orders rose 0.9 percent after climbing at the same rate in July, suggesting factories might have to ramp up production. Shipments fell 0.2 percent after rising 1.2 percent the prior month, while inventories increased 0.4 percent.

The department said orders for durable goods -- manufactured products expected to last three years or more -- fell 0.1 percent, unrevised from an initial estimate. Durable goods orders excluding transportation were down an unrevised 0.1 percent, while orders for non-defense capital goods excluding aircraft rose a downwardly revised 0.9 percent.

(Reporting by Jason Lange, Editing by Andrea Ricci and James Dalgleish)

Ben Bernanke