NEW YORK (CNNfn) - Most major U.S. stock indexes rose Wednesday after fresh evidence showed that the nation's housing market cooled last month, sparking hope on Wall Street that borrowing costs won't go any higher.
The Dow Jones industrial average and S&P 500 advanced for the third straight session. But the Nasdaq composite index fell, wiping out all of its gains for the week, hit by a big slide in Dell Computer, which suffered a brokerage downgrade.
Still, investors generally cheered a government report showing that new home sales slowed for the third straight month in June. The degree of the downturn, which took analysts by surprise, suggested that the Federal Reserve's six interest rate hikes in more than a year are biting, making tighter credit unnecessary.
 "People were encouraged that the Fed may not have to raise rates August 22," Arnie Berman of Wit SoundView told CNNfn's market coverage..
Led by Hewlett-Packard, the Dow rose 80.58, or 0.76 percent, to 10,687.53.
But the Nasdaq fell 27.06 to 3,658.46, its fifth drop in six sessions. The index, down more than 14 percent since July 17, has been hurt by fears of a slowdown in earnings growth among technology companies. Wednesday's housing figures did not seem to alleviate those concerns.
"People are questioning the underlying fundamentals of (technology stocks)," Joseph McAlinden, chief investment officer at Morgan Stanley Dean Witter Funds, told CNN's Street Sweep. He sees the Dow outperforming the Nasdaq in the weeks ahead
The S&P 500, meanwhile, advanced 0.60 to 1,438.70.
 Market breadth was mixed. Advancing issues on the New York Stock Exchange beat decliners 1,566 to 1,298 on trading volume of 986 million shares. But Nasdaq losers topped winners 2,060 to 1,907 as more than 1.4 billion shares changed hands.
In other markets, Treasury securities fell. The dollar declined against the yen but rose versus the euro.
Home sales fall
Sales of new homes in the U.S. fell for a third straight month in June to the lowest levels in more than two years, the government reported -- a sign that higher interest rates are deterring buyers from entering the real estate market.
In a stock market living from one economic indicator to the next, the number offered hope that borrowing costs -- now at their highest levels in nearly 10 years -- may not need go any higher. Stock investors fret that tighter credit will hurt corporate profits.
 "The results imply that housing activity is responding to higher interest rates," Mike Moran, chief economist at Daiwa Securities, said. "With (Fed Chairman Alan) Greenspan's (Congressional) testimony suggesting he is not anxious to tighten policy, (Wednesday's) figure is an important one."
Linda Duessel, senior portfolio manager at Federated Investors, told CNNfn's market coverage that recent economic signals indicate a slowdown -- which should keep the Fed from raising rates this month. (367K WAV) (367K AIFF)
Investors appeared to agree. Hewlett-Packard (HWP: Research, Estimates) rose 4-5/8 to 112-1/2 after Bear Stearns raised its fiscal third-quarter earnings estimate to 85 cents a share from 80 cents per share.
On the Nasdaq, Global Crossing (GBLX: Research, Estimates) gained 2-5/8 to 27-15/16 after the company posted a smaller-than-expected loss of $504.2 million, or 61 cents a share. Wall Street expected a 63-cent-a-share loss. And Internet consultant Sapient (SAPE: Research, Estimates) surged 16-7/8 to 120-3/4 after saying second-quarter earnings nearly doubled to $15.6 million, or 23 cents per share, from $8.2 million, or 13 cents, in the year-earlier quarter.
Oil, biotech and drug stocks showed strength. Amgen (AMGN: Research, Estimates) rose 1-5/16 to 70-5/16, Exxon-Mobil (XON: Research, Estimates) added 2-7/8 to 82-7/8 while Pfizer (PFE: Research, Estimates) was up 3/8 to 46-1/8.
Among the day's losers, Dell (DELL: Research, Estimates) lost 2 to 39-9/16 after U.S. Bancorp Piper Jaffray downgraded the stock to "buy" from "strong buy."
Health insurer Cigna (CI: Research, Estimates), meanwhile, fell 4-3/4 to 96-1/2. The losses came despite the company beating second-quarter forecasts by earning $279 million, or $1.71 a share, excluding special items. First Call had estimated earnings of $1.56 a share.
Uncertainty ahead?
Wednesday's uneven market is part of a larger pattern. Tech stocks rose Monday, but gave up those gains Tuesday as money moved into drug and consumer products makers. Some of those gains eroded Wednesday.
 Analysts say this constant rotation reflects uncertainly over the state of future corporate profits and the direction of interest rates -- questions that may not get resolved for months.
But one piece of the puzzle could fall into place Friday when the government reports on employment figures for July. The most closely watched numbers on Wall Street could offer more clues about whether the Fed raises borrowing costs later this month.
In other economic data Wednesday, leading economic indicators for June were unchanged from May, according to the Conference Board. That's stronger than the 0.1 percent decline analysts expected. But the gauge, which measures future trends in the U.S. economy, rarely moves markets. 
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