NEW YORK (CNNMoney.com) -
The Nasdaq slipped, and the broader market ended little changed Tuesday as investors continued to backpedal after a five-week rally that pushed the major gauges to levels not seen since 2001.
As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to modest gains at the open Wednesday, when fair value is taken into account.
The Dow Jones industrial average (down 2.56 to 10,888.16, Charts) ended just below unchanged. Earlier in the session, the blue-chip average came within 40 points of 11,000, a key psychological level the 30-share index hasn't hit since June 2001.
The broader S&P 500 (up 0.02 to 1,257.48, Charts) index was unchanged, while the Nasdaq composite (down 6.70 to 2,232.71, Charts) lost 0.3 percent.
Treasury prices slumped, boosting the yields, and the dollar gained versus other major currencies.
The stock market had rallied in the morning after a series of strong economic reports encouraged investors about the outlook for 2006. But the advance lost some steam in the afternoon, amid worries over higher interest rates and some lethargy after November's big rally.
"Simply put, we've had a great move over the last five weeks, and we need to consolidate some of those gains," said Art Hogan, chief market analyst at Jefferies & Co.
That was certainly the case Monday, when stocks saw a broad decline after a month of gains that pushed the S&P 500 and Nasdaq to four-and-a-half year highs. The Dow industrials, the world's most widely watched stock market gauge, closed just below its highest level in four-and-a-half years.
"It's great that we're within eyesight of 11,000 on the Dow again, and that the other two [major gauges] are positive for the year," he added. "But we're running out of steam as we get near benchmarks that people are watching."
Wednesday brings a slew of economic news, including the read on gross domestic product growth.
Due before the open Wednesday, GDP is expected to have grown at a 4.1 percent annual rate versus an initial read of 3.8 percent, according to a consensus of economists surveyed by Briefing.com. GDP grew at a 3.3 percent rate in the second quarter.
The Chicago PMI, a read on manufacturing in the Midwest region, is due shortly after the open, as is the weekly oil inventories report.
Later in the session, the Federal Reserve releases its "beige book" read on the economy. The survey of the Fed's 12 districts is used by the central bank in making decisions about short-term interest rates.
Morning reports on new home sales, durable goods orders and consumer confidence all topped forecasts and reinforced optimism about the strength of the economy.
"We've had a lot of good economic news lately, and this morning's reports are following on the heels of that," said Michael Darda, chief economist at MKM Partners. "We're seeing an acceleration on the business side and the consumer side."
But with the strong reports came the realization that the Fed's interest rate-hiking campaign may not be over as quickly as some investors had hoped. That factor sent bond yields surging, and may have put a cap on any stock gains.
Treasury prices tumbled, raising the yield on the 10-year note to 4.48 percent from 4.40 percent late Monday. Treasury prices and yields move in opposite directions.
"The bond market reaction shows that they are not prepared for a Fed that is probably going to continue to hike into next year," Darda added. "Whereas the stock market seems to have already priced in higher inflation and higher rates."
New home sales jumped 13 percent to a record 1.42 million annual rate, according to a government report, well above forecasts for a decline to a 1.2 million rate, according to economists surveyed by Briefing.com.
A key index of consumer confidence rose to 98.9 in November, the Conference Board reported Tuesday, topping forecasts for a rise to 90, with consumers reacting to lower energy prices. Confidence fell to 85 in October in the aftermath of two hurricanes and still-high oil prices.
Consumer confidence is closely watched since consumer spending fuels more than two-thirds of the economy.
Orders for durable goods rose 3.4 percent in October, the Commerce Department reported Tuesday, versus a revised 2 percent decline in September. Economists were expecting a gain of 1.5 percent, on average, according to a Briefing.com survey.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than nine to seven on volume of 1.60 billion shares. On the Nasdaq, advancers edged decliners by a slim margin as 1.78 billion shares changed hands.
A number of large technology and biotech shares slipped, weighing on the Nasdaq.
Among the movers, Internet shares such as Google (down $19.94 to $403.54, Research), Yahoo! (down $0.92 to $40.19, Research) and eBay slipped, dragging down the Goldman Sachs (down 1.45 to 205.87, Charts) Internet index.
A number of chipmakers were weaker, including Nvidia (down $2.40 to $35.48, Research), which slumped after Deutsche Bank and JMP Securities both downgraded the stock.
New York Stock Exchange-traded chipmaker Advanced Micro Devices (down $0.91 to $25.58, Research) also slipped on a report showing that its flash-memory unit will post a quarterly loss, ahead of a planned initial public offering.
Dow stock Wal-Mart Stores (down $0.99 to $49.01, Research) was among several retailers declining.
Among other movers on the Dow, Merck (up $0.46 to $30.02, Research) gained 1.6 percent, bouncing back after Monday's selloff. Merck had slid Monday after announcing a large cost-cutting program.
U.S. light crude oil for January delivery fell 86 cents to settle at $56.50 a barrel on the New York Mercantile Exchange after slumping more than 2 percent Monday.
The dollar jumped versus the euro and yen, recovering from Monday's big slide.
COMEX gold rose 90 cents to settle at $503.50.