Stocks struggle after rally

NEW YORK (CNNMoney.com) -- Stocks ended a choppy session little changed Tuesday as investors weighed a seesawing dollar, a slew of auto sales and reports on pending home sales and factory orders.

The Dow Jones industrial average (INDU) lost 12 points, or 0.1%. The S&P 500 index (SPX) added 3 points, or 0.3%. The Nasdaq composite (COMP) was barely changed.

After the three leading indexes climbed to fresh 15-month highs Monday, a weak dollar on Tuesday initially gave a push to dollar-traded commodities and select stocks that do business overseas. But the dollar turned mixed by the late afternoon, diluting its impact.

A late-session advance in the influential banking sector helped the market find its footing late in the session, with the KBW Bank (BKX) index adding 2.2%, thanks to strength in components such as JPMorgan Chase (JPM, Fortune 500) and Capital One Financial (COF, Fortune 500).

Investors are also being cautious after a tumultuous but strong year on Wall Street, in which the broad S&P 500 managed to gain over 23% despite touching a more than 12-year low in March. Between that March 9 low point and year end, the S&P 500 gained 65%.

"After the first-quarter selloff (last year), the market was undervalued, but at this point it's fairly valued, and that makes it a lot more challenging for investors," said Alan Lancz, president at Alan B. Lancz & Associates.

He said that the trend in 2010 will likely remain up, but that the gainers will be a more selective bunch than last year, when most areas of the market advanced. Lancz believes that high-dividend paying companies that do a lot of business globally are likely to stand out.

In general, "there is still a lot of money on the sidelines, and earnings in the first half of the year should benefit from easy comparisons to a year ago, all of which bodes well for stocks," he said.

Housing sees setback: Homebuyers signed 16% fewer sales contracts in November than in December, according to a National Association of Realtors report released in the morning.

Economists surveyed by Briefing.com expected the report to show that pending home sales fell 2% in November after rising for 9 straight months. Still, sales were up 15.5% from November 2008.

The November setback reflected the near-expiration of the government's first-time homebuyers tax credit. Buyers jumped in when the credit was expected to expire on Nov. 30. But once it was announced that it was being extended through June, the buying frenzy lost momentum.

Economy: Another report showed that factory orders increased by 1.1% in November after climbing 0.8% in October. Economists thought orders would grow by 0.5%.

A third report showed that severe unemployment worsened in big cities in November. The government reported that 17 of 372 metropolitan areas surveyed had unemployment rates of at least 15% in November up from 15 areas in October.

Kraft Foods: The Dow component has sweetened its $16.4 billion hostile takeover offer for British chocolate maker Cadbury, providing a partial cash-alternative to its already announced deal.

The funding would come from Kraft (KFT, Fortune 500)'s sale of its frozen pizza business to Swiss food company Nestle for $3.7 billion in cash, a deal announced early Tuesday. Nestle has also said it won't bid for Cadbury.

But Berkshire Hathaway, the conglomerate run by influential investor Warren Buffett and Kraft's largest shareholder, said it is voting "no" on Kraft's request to issue as many as 370 million shares to help finance the bid for Cadbury. Berkshire said that allowing this would essentially be giving Kraft a blank check.

Kraft extended its deadline for the Cadbury offer to Feb. 2. Kraft shares rallied nearly 5%.

Technology: Google (GOOG, Fortune 500) released its Nexus One smartphone Tuesday, the first mobile device entirely designed by the company. Previously, Google had designed mobile software such as Google Maps and also released its Android operating system.

Also, Apple said Tuesday the number of iPhone applications downloaded from its App store has topped 3 billion. Late Monday, a Wall Street Journal report said that Apple will ship its much-anticipated tablet computer in March, following a January unveiling.

Auto and truck sales: Automakers reported improved December sales at the end of their worst year in decades.

Ford Motor (F, Fortune 500)'s U.S. sales jumped 34% in December versus a year ago and over 50% versus the previous month. But Ford's sales for the full year fell 15%.

Rival General Motors said sales fell 6% in December versus a year ago, but said that sales rose 38% from November. For the full year, GM said sales fell 30%.

Among other companies reporting, Chrysler said that sales in December fell 4% versus a year ago and up 36% from November. Chrysler also dropped 36% for the year and sold fewer than a million vehicles, its worst year since the early 1960s.

World markets: Asian markets ended higher. In Europe, London's FTSE 100 rose 0.4%, France's CAC 40 was little changed and the German DAX lost 0.3%.

Commodities and the dollar: The dollar gained versus the euro and fell against the yen.

COMEX gold for February delivery gained 40 cents to settle at $1,118.70 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery rose 26 cents to settle at $81.77 a barrel on the New York Mercantile Exchange, the highest close since October 2008.

Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.75% from 3.82% late Monday. Treasury prices and yields move in opposite directions.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers by three to two on volume of 1.19 billion shares. On the Nasdaq, decliners topped advancers by five to four on volume of 2.33 billion shares.