Dow gains, Nasdaq falters
Investors show indecision following a two-month rally, jittery about automaker and housing market weakness.
NEW YORK (CNNMoney.com) -- Blue chips gained and the Nasdaq declined in a mixed Tuesday session on Wall Street as investors showed caution after the recent rally and amid ongoing worries about banks and autos.
The Dow Jones industrial average (INDU) gained 50 points, or 0.6%.
The S&P 500 (SPX) index ended just below unchanged. The Nasdaq composite (COMP) lost 15 points, or 0.9%.
Stocks slumped through the early afternoon Tuesday, but managed to cut some losses in the last hour.
Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), Johnson & Johnson (JNJ, Fortune 500) and Coca-Cola (KO, Fortune 500) were among the stocks lifting the Dow.
Stocks slipped Monday, with the Dow posting its worst day in 3 weeks, as the two-month old stock rally hit a wall. All three major gauges have risen more than 30% since hitting multi-year lows on March 9. Bets that the economy and financial sector are close to stabilizing have fueled the gains.
But after such a big run, stocks were vulnerable to a bit of a pullback, said John Wilson, chief technical strategist at Morgan Keegan.
"With everyone expecting a big correction, I don't think we'll see it," he said. "We'll probably just see a few more down days but not something more substantial."
He said the bank stocks have gotten a little ahead of themselves and are probably due for a bigger retreat, in particular.
After the close, Applied Materials (AMAT, Fortune 500) reported a steer-than-expected quarterly loss versus a profit a year ago. The chipmaker also reported a plunge in revenue, but results were better than expected.
Shares slumped 2% in after-hours trading.
Also after the close, Freddie Mac (FRE, Fortune 500) reported a $9.9 billion quarterly loss and asked the government for another $6.1 billion in help.
On Wednesday, April retail sales are due before the open from the Commerce Department. April sales are expected to hold steady after falling 1.2% in March. Sales excluding volatile autos are expected to have rise 0.2% after falling 1% in March.
Reports are also due on April import and export prices, March business inventories and weekly crude inventories.
Economy: The Treasury budget for April revealed a $20.9 billion deficit. It was the first during the month in 26 years, reflecting the impact of the recession and economic stimulus efforts. Economists surveyed by Briefing.com expected a deficit of $20 billion.
Treasury had reported a budget deficit of $191 billion in March.
Treasury also released its annual report on the health of social security and Medicare, which showed that the recession has hit both programs hard.
The housing market contracted at a record pace in the first three months of the year, according to a National Association of Realtors report released Tuesday.
The national median price of single family homes sold during the first three months of the year fell 13.8% versus a year ago to $169,000.
The March trade deficit widened after narrowing in February, according to a government report released Tuesday morning. The deficit widened to $27.6 billion from a revised $26.1 billion. Economists expected a reading of $29 billion, on average, according to a Briefing.com survey.
Financials: Bank of America (BAC, Fortune 500) reportedly made $7.3 billion from the sale of 13.5 million shares of China Construction Bank to a group of buyers, according to published reports.
A number of banks sold stock or said they plan to sell stock to raise money.
U.S. Bancorp (USB, Fortune 500) sold $2.5 billion of stock and Bank of New York Mellon (BK, Fortune 500) sold around $1.2 billion in stock. BB&T (BBT, Fortune 500) is expected to sell $1.5 billion in stock. Regulators determined that the three banks do not need to raise more capital as a result of the bank stress tests.
In other news, Citigroup (C, Fortune 500) said it has approved $8.2 billion in lending to consumers this year, thanks to the government funding it received through the bank bailout plan.
The bank sector was lower, but managed to trim losses late in the session. The KBW Bank (BKX) sector index, which includes two dozen of the largest banks, fell 4.2%.
Corporate news: Automakers were weaker, with General Motors (GM, Fortune 500) down on growing speculation that the company is likely to file for bankruptcy protection. The shares fell intraday to $1.09, the lowest level since 1933 Tuesday, one day after a group of the company's executives said they had sold stock and direct holdings in the automakers. Shares ended at $1.15, down 20%.
Ford Motor (F, Fortune 500) fell after saying late Monday that it will sell 300 million shares of stock to raise roughly $1.8 billion in capital.
Bonds: Treasury prices were little changed, with the yield on the benchmark 10-year note at 3.17% unchanged from Monday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian markets ended in mixed territory, while European markets ended lower.
In currency trading, the dollar fell versus the euro and the yen.
U.S. light crude oil for June delivery rose 35 cents to settle at $58.85 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $10.40 to settle at $923.90 an ounce. 
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