Dow nears record, then retreats

NEW YORK (CNNMoney.com) -- Stocks ended lower Wednesday, giving up gains, as investors showed some caution after the Dow industrials and S&P 500 index briefly touched record territory.

The Dow Jones industrial average (down 13.33 to 13,526.62, Charts) lost a few points, according to early tallies. Earlier, the blue-chip leader briefly hit an intraday record of 13,609.60 before pulling back.

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The S&P 500 index (down 2.15 to 1,521.97, Charts) lost less than two points. Earlier, the broad average had surpassed its all-time closing high on an intraday level. The closing high is 1,527.46 and was hit on March 24, 2000, near the end of the last big bull run that was sparked by the 1990s tech boom.

The tech-fueled Nasdaq composite (down 10.97 to 2,577.05, Charts) lost 0.4 percent, after ending the previous session at a new six-year high.

The Russell 2000 (Charts) small-cap index lost 0.4 percent, after ending the previous session at a record.

Treasury prices slipped, raising the corresponding yields. Oil and gold prices rose.

Here's what was moving near the close.

Stocks rose through mid-afternoon, as investors welcomed the latest deal news, including talk of a potential bidding war in the commodities sector. But stocks lost steam as the session wore on and the major gauges bumped up against records.

Also in focus Wednesday: comments from Treasury Secretary Henry Paulson at the end of two-day trade talks with China.

Since bottoming in late February-early March, stocks have been on the rise. The Dow industrials have now surged for 7 weeks straight. Gains have been fueled by strong earnings and the big wave of merger and deal news.

After such a run, minor pullbacks are to be expected, analysts said. However, the positive trend is likely to continue for the time being, said Alan Lancz, money manager and editor of Lancz Letter.

"Between private equity buyouts and companies buying each other, it stresses that there is still value out there," Lancz said.

Stocks are also benefiting from the lack of competition, he said. "There's a lot of cash on the sidelines and not a lot of other choices, with bonds and real estate not providing competition."

In corporate news, Alcan (up $4.97 to $86.00, Charts) said late Tuesday that it turned down a nearly $28 billion unsolicited offer from Alcoa (up $1.32 to $40.27, Charts, Fortune 500), because the amount was too low. On Wednesday, media reports said Alcan was in talks with BHP Billiton (up $1.00 to $51.75, Charts), suggesting a potential bidding war could be brewing.

Alcan, Alcoa and BHP shares all gained.

Morgan Stanley (up $0.21 to $85.84, Charts, Fortune 500) said it is buying REIT Crescent Real Estate Equities for about $2.3 billion plus debt and preferred shares. Morgan Stanley shares gained 1.5 percent.

Amazon.com (up $0.12 to $69.00, Charts, Fortune 500) said it is buying Brilliance Audio, a publisher of audio books, for an undisclosed amount.

Payless ShoeSource (up $3.33 to $35.23, Charts) said it is buying Stride Rite (up $4.76 to $20.21, Charts) for $800 million. Payless shares jumped more than 10 percent, while Stride Rite added more than 30 percent.

Target (up $0.63 to $58.67, Charts, Fortune 500) posted higher quarterly earnings that beat estimates on higher quarterly revenue that missed estimates. Shares of the retailer climbed almost 3 percent.

Cypress Bioscience (up $7.92 to $16.37, Charts) surged 94 percent in active Nasdaq trading after a study showed that its depression drug also reduced pain for patients with fibromyalgia, a disease that causes pain and stiffness. Partner Forest Laboratories (up $1.42 to $53.30, Charts) gained 9 percent.

Market breadth was positive. On the New York Stock Exchange, losers beat winners by 9 to 7 on volume of 1.14 billion shares. On the Nasdaq, decliners edged advancers 8 to 7 on volume of 1.53 billion shares.

On the economic front, Secretary Paulson said Wednesday that Chinese officials see the need for greater flexibility in the yuan, its currency. Paulson also said the officials agreed there is a need to rebalance the Chinese economy so it is less dependant on exports.

The growing trade deficit with China hit $235 billion last year due to the low-priced yuan. U.S. businesses have complained that the cheap yuan makes it too hard for them to compete with cheaper Chinese imports and lawmakers have been pushing toward legislation that would compel China to allow its currency to rise.

U.S. light crude oil for July delivery rose 27 cents to $65.78 a barrel on the New York Mercantile Exchange. Prices rose as U.S. naval action in the Middle East overshadowed a U.S. report showing higher refinery activity.

COMEX gold for June delivery rose $2.70 to $662.60 an ounce.

Treasury prices inched lower, raising the yield on the 10-year note to 4.86 percent from 4.83 percent late Monday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar fell versus the euro and the yen.