Wall Street struggles with economic jitters

NEW YORK (CNNMoney.com) -- Worries about credit markets and the housing sector derailed stocks for the second straight session, even amid strong corporate earnings from Amazon.com and Boeing.

The Dow Jones industrial average (up 5.77 to 13,722.72, Charts) rose about 0.2 percent with less than 2 hours remaining in the session, after climbing by as much as 103 points at the market open. A day earlier, the index of 30 blue chips tumbled 226 points, its third biggest point loss of the year, on worries about housing weakness and the nation's credit markets.

The broader S&P 500 (down 2.71 to 1,508.33, Charts) and the tech-laden Nasdaq (down 9.62 to 2,630.24, Charts) were basically flat.

Upbeat results from online retailer Amazon.com helped send stocks higher at the market open, which reported its quarterly profit more than tripled and raised its 2007 sales and operating earnings outlook. Amazon (up $17.51 to $86.76, Charts, Fortune 500) shares soared 25 percent in afternoon trade on the Nasdaq.

But investors' enthusiasm cooled after the National Association of Realtors said that the pace existing home sales fell more than expected by 3.8 percent to a 5.75 million annual rate in June.

News that private equity firm Cerberus Capital Management was experiencing difficulties tapping debt markets for $20 billion needed for the purchase of its troubled Chrysler unit because of soft investor demand, fanned credit market fears that surfaced a day earlier, sending stocks lower.

Those fears, and concerns about the housing market, emerged after Countrywide Financial (down $1.44 to $29.06, Charts, Fortune 500), the nation's largest mortgage lender, said it saw no upturn in housing until 2009, at the earliest, and reported a 33 percent drop in profits.

Famed bond fund manager Bill Gross added to those fears Tuesday after he warned that the recent woes in the subprime mortgage market were spilling over to junk bonds said that credit markets are facing a "sudden liquidity crisis."

"The question here is when is the Federal Reserve going to throw in the towel and recognize this is more than a limited subprime problem?" said Michael Strauss, chief economist at Commonfund, referring to the housing market.

In other economic news, the Fed issued its so-called Beige Book, which measures economic conditions around the country, revealing modest economic growth in the U.S., but further declines in home building and real estate in most regions.

On the earnings front, Dow component Boeing (up $3.60 to $107.40, Charts, Fortune 500) posted much better-than-expected earnings, lifting its shares more than 3 percent in afternoon trade on the New York Stock Exchange.

The third largest U.S. oil company ConocoPhillips (up $1.21 to $83.54, Charts, Fortune 500) reported lower results that were solidly better than expected when excluding charges related to its Venezuelan operations. Consumer products maker Colgate-Palmolive (up $0.92 to $69.17, Charts, Fortune 500) also posted earnings that topped estimates.

Shares of Corning (down $1.79 to $24.40, Charts, Fortune 500), the world's largest maker of fiber optic cable, tumbled 7 percent after the company reported lower quarterly profits, hurt by weaker-than-expected sales.

Apple (up $1.34 to $136.23, Charts, Fortune 500) is set to report after the market close. Its shares lost 6 percent Tuesday on concerns about a weaker than expected report on activations of the iPhone from AT&T (up $0.66 to $40.34, Charts, Fortune 500), which owns the cell phone service that uses the device.

Oil prices retreated from session highs after the weekly U.S. fuel inventory report revealed a stronger-than-expected increase in inventories. U.S. light crude surged $1.65 cents to $75.21 a barrel on the New York Mercantile Exchange.

Treasury prices edged higher, leaving the yield on the 10-year note at 4.90 percent late Tuesday. Bond prices and yields move in opposite directions.

The dollar gained against the euro and the yen. COMEX gold for August fell $11.30 to $673.50.

Overseas, major Asian stocks and European markets finished lower.