Homebuilding report fails to pep investors

NEW YORK » Wall Street pared an earlier advance to end mixed yesterday as investors' persistent concerns about interest rates and the economy countered relief over an upbeat homebuilding report.

A sharply stronger-than-expected jump in new home construction fed optimism that the overall economy remains sturdy in the face of higher lending rates and gasoline prices. However, disappointing forecasts for June business sent homebuilders' shares sliding.

Upbeat sales from Caterpillar Inc. and steady oil prices also gave stocks support. But while the market recovered somewhat from Monday's decline, erratic trading like yesterday's is anticipated while investors await the Federal Reserve's latest statement on inflation and economic growth after its meeting next week.

Analysts say the lack of economic data will likely leave investors unsure about buying stocks until the Feds' interest rate decision. Last week, increased certainty that the central bank will hike rates again helped the market steady itself from nearly six weeks of losses, but Wall Street has since struggled to build momentum.

"I think today is more of a quiet rally or stabilizing in the marketplace," said Jay Suskind, head trader at Ryan, Beck & Co. "Inflation, stagflation, interest rates -- there are all those words out there making this a very tough market."

At the close of trading, the Dow Jones industrial average gained 32.73, or 0.3 percent, to 10,974.84, after rising almost 88 points earlier.

Broader stock indicators finished little changed. The Standard & Poor's 500 index fell 0.02 to 1,240.12, and the Nasdaq composite index lost 3.36, or 0.16 percent, to 2,107.06.

Bonds slipped, with the yield on the 10-year Treasury note edging up to 5.15 percent from 5.14 percent late Monday. But the 2-year yield stood at 5.19 percent, signaling less confidence in long-term debt amid expectations of an economic slowdown.

Elsewhere, the U.S. dollar pulled back against the Japanese yen and was barely changed versus European currencies. Gold prices recovered an earlier dip to reach about $580 per ounce.

Overseas, Japan's Nikkei stock average slid 1.43 percent in the wake of Wall Street's Monday decline.

Wall Street appeared to be coming to terms with the fact that the recent uptick in core inflation has almost guaranteed a rate hike from the Fed next week and has raised the chances of another increase in August.

Although stocks have steadied from their recent pullback, investors were waiting for the Fed's opinion of the economy before placing bets.