Choppy day for stocks

Markets seesaw as investors eye a weak reading on consumer sentiment following a big rally.

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By Alexandra Twin, senior writer

Has the recession caused you to change your spending and saving habits?
  • Yes, permanently
  • Yes, but only for a short time
  • No

NEW YORK( -- Stocks ended mixed Tuesday as investors weighed a weaker-than-expected consumer confidence report and a better-than-expected housing report in the aftermath of a big rally.

The Dow Jones industrial average (INDU) lost 12 points, or 0.1%. The S&P 500 (SPX) index fell almost 3 points, or 0.3%. The Nasdaq composite (COMP) rose 7 points, or 0.4%.

Stocks have gained for the last two weeks, as investors have breathed a sigh of relief that second-quarter results have been mostly better than expected. The Dow and S&P 500 have added around 11.5% and the Nasdaq has gained 12%.

But after such a big run in a short period of time, stocks have become vulnerable.

Sprint Nextel (S, Fortune 500), Time Warner (TWX, Fortune 500), Aetna (AET, Fortune 500) and ConocoPhillips (COP, Fortune 500) are all due to report results Wednesday morning.

The June durable goods orders report is also due Wednesday morning, along with the weekly crude oil inventories report from the Energy Information Administration. In the afternoon, the Federal Reserve releases its periodic "Beige Book" report on economic activity in its 12 districts.

Economy: Consumer confidence slipped for the second straight month, the Conference Board reported, as growing joblessness and a prolonged recession took a toll on investor psychology. The index dipped to 46.6 in July from 49.3 in June. Economists thought the index would slip to 49, according to a survey.

"Confidence has remained low, and with unemployment rising to over 10% in the next few months, it's going to remain low," said Scott Anderson, senior economist at Wells Fargo.

As a result of growing joblessness and weak consumer confidence, spending by consumers is likely to remain sluggish, he said. That doesn't bode well for GDP growth, which drives two-thirds of consumer spending.

On Friday, the government releases the initial reading on second-quarter GDP. The report is expected to show that GDP shrank at a 1.5% pace, according to economists, after shrinking at a 5.5% pace in the first quarter. The slower pace may signal better times are on the horizon.

On a more positive note, a key measure of home prices showed its first monthly increase in three years. The S&P/Case-Shiller 20-city home price index rose 0.5% in May. The index dropped 17.1% versus a year ago, short of forecasts for a bigger drop of 17.9%. It was the fourth month in a row that the pace of declines lessened.

On Monday, another report showed sales of new homes rose more than expected in May.

"I do think we are seeing a bottoming in the housing market," Anderson said. "Sales activity has picked up for both new and existing homes and that has helped stabilize prices. But it's mostly about affordability."

Oil prices and stocks: Among the companies reporting results on Tuesday, Valero Energy (VLO, Fortune 500) reported weaker revenue and earnings that topped estimates. Shares fell 2.4%.

It was one of several oil services companies tumbling, along with the price of crude.

U.S. light crude oil for September delivery fell $1.15 to settle at $67.23 a barrel on the New York Mercantile Exchange.

Dow components Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500) both declined modestly. The Amex Oil (XOI) index fell 1.4%.

Other company news: Bank of America (BAC, Fortune 500) shares gained after the company said it plans to reduce some of its 6,100 branch network. Reports said it planned to cut as much as 10% of the network, but the bank said the figure was smaller.

In deal news, IBM (IBM, Fortune 500) said it will buy Chicago-based business software maker SPSS in an all-cash deal worth $50 per share or $1.2 billion.

Sprint Nextel (S, Fortune 500) will buy the remaining 87% of Virgin Mobil it doesn't already own in an all-stock deal worth $5.50 per share or $483 million.

Media conglomerate Viacom (VIA) reported weaker quarterly profit that nonetheless topped expectations.

This week is the biggest for corporate results, with 146 of the S&P 500 due to release reports. So far, 77% of reported earnings have topped forecasts, versus the long-term average of 61%, according to earnings tracker Thomson Reuters.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.70% from 3.72% late Monday. Treasury prices and yields move in opposite directions.

The 2-year notes declined after a $42 billion auction did not generate as much interest as the prior month's 2-year note auction.

Other markets: In global trading, European and Asian markets ended higher.

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

COMEX gold for December delivery fell $14.60 to settle at $941.70.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by a narrow margin on volume of 1.24 billion shares. On the Nasdaq, advancers topped decliners by seven to six on volume of 2.24 billion shares. To top of page

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