Stocks give up gains

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NEW YORK (CNNMoney.com) -- Stocks erased early gains, turning lower near midday Tuesday, as investors mulled cautious comments from a pair of Fed officials about the economic outlook and more bad news for the housing sector.

The Dow Jones industrial average (INDU) lost 0.4 percent more than 2 hours into the session. The broader S&P 500 (INX) index and the Nasdaq (COMPX) composite were also lower.

Stocks rose Tuesday morning as investors welcomed reports of executive changes at Bear Stearns and Starbucks. But gains petered out as the morning wore on amid spiking oil and gold prices, the housing market news, and comments from Fed officials that seemed to downplay the chances of a big interest rate cut at the next policy meeting.

A mid-morning report from a realtors group showed that contracts to sell existing homes fell in November by a steeper-than-expected margin. The group also pushed back its forecast for a price rebound to 2009.

Homebuilding stocks slumped on the report and some mortgage stocks were under pressure as well.

Additionally, Boston Fed president Eric Rosengren, speaking Tuesday morning, said that if forecasts pan out, the United States will see the longest housing investment decline in 50 years, according to Briefing.com. Rosengren was a voting member of the Fed's policy committee in 2007.

With worries that the economy could be heading into recession, Wall Streeters have been looking to the Federal Reserve to cut short-term interest rates by as much as a half-percentage point at the next policy meeting at the end of January.

Philadelphia Fed President Charles Plosser, speaking Tuesday morning, said that policy decisions are getting harder to make because inflationary pressures are rising and slow economic growth is no longer sufficient to take the edge off pricing pressures. However, he said he wouldn't be opposed to more cuts. Plosser will be a voting member of the Fed's 2008 policy-setting committee, starting with the January meeting

Meanwhile, oil prices jumped back above $97 a barrel and gold prices flirted with record highs.

Treasury prices slumped, raising the yield on the 10-year note to 3.86 percent from 3.83 percent late Monday. Treasury prices and yields move in opposite directions.

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

Among stock movers, Bear Stearns (BSC, Fortune 500) initially rose after the Wall Street Journal reported that its chief executive is stepping down amid the investment bank's big subprime losses. He will be replaced by the company's current president. However, the stock turned negative as the session wore on.

Starbucks (SBUX, Fortune 500) rallied after it said late Monday that it was replacing its CEO with its chairman and former chief executive, as well as closing under-performing stores.

The news followed Monday's announcement that McDonald's (MCD, Fortune 500) will unveil its own coffee bars, complete with baristas, at its nearly 14,000 U.S. locations, taking on Starbucks' dominance in the area.

In other news, builder KB Home (KBH, Fortune 500) reported a steeper-than-expected quarterly loss, reflecting the ongoing problems in the housing sector.

U.S. light crude oil for February delivery rose $1.61 to $96.70 a barrel on the New York Mercantile Exchange Tuesday.

COMEX gold for February delivery rallied $15.50 to $877.50 an ounce.