Stocks Trade Mixed after Steep Rally

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NEW YORK – A mostly downbeat batch of economic news gave investors a reason to cash in some of their recent gains Wednesday, leaving stock prices widely mixed. Blue chips pulled back, while tech stocks that have lagged the market were rallying.

Wall Street is coming off three sessions of gains that gave the Dow Jones industrials and the Standard & Poor's 500 index their first triple-session advances in more than two months, so some retrenchment wasn't surprising. Many traders were also selling because they are hesitant to go into the extended Thanksgiving holiday weekend with long positions.

While investors largely expected Wednesday's spate of economic readings would be weak, they appeared to look to the data as further justification to collect profits.

Among the reports, the Labor Department said initial requests for unemployment benefits fell to a seasonally adjusted 529,000 from the previous week's upwardly revised figure of 543,000. That is lower than analysts' expectations of 537,000. Still, the initial claims remain at recessionary levels.

Meanwhile, the Commerce Department said orders to U.S. factories for big-ticket manufactured goods plunged in October by the largest amount in two years as the economy weakened. The 6.2 percent drop was more than double the 3 percent decline economists expected.

It also reported that sales of new homes fell 5.3 percent in October to the lowest level in nearly 18 years. The seasonally adjusted annual sales pace of 433,000 homes was the lowest level since January 1991, when the country was facing another steep housing downturn.

Americans also cut back on their spending in October by the largest amount since the 2001 terror attacks. The Commerce Department said consumer spending plunged by 1 percent last month, worse than the 0.9 percent decline that had been expected. The report also said personal incomes rose 0.3 percent last month, more than the 0.1 percent gain analysts had predicted.

In the first hour of trading, the Dow industrials fell 89.29, or 1.05 percent, 8,390.18.

Broader indicators were mixed. The S&P 500 fell 8.37, or 0.98 percent, to 849.02, while the Nasdaq composite index rose 5.02, or 0.34 percent, to 1,469.75.

The Russell 2000 index of smaller companies fell 1.47, or 0.33 percent, to 441.71.

On Tuesday, stocks finished mostly higher as investors were encouraged by new government initiatives to help unfreeze the credit markets. The Treasury Department and the Federal Reserve said they planned to provide $800 billion to aid the market for consumer debt and to make mortgage loans cheaper and more available.

The Dow finished up 36 points, for a gain of more than 900 points across three sessions. The Dow last put a three-day advance together on Aug. 26-28. The S&P 500, meanwhile, had its first three-day rise since Sept. 10-12. Tech stocks lagged and sent the Nasdaq moderately lower as investors feared businesses will further cut back on technology spending.

Still, the market's performance in recent sessions has been a welcome show of stability as stocks have generally traded with less volatility than they had in the past three months as the market's yearlong pullback intensified.

Bond prices were mixed Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.00 percent from 3.10 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.11 percent from 0.09 percent late Tuesday.

The dollar mostly rose against other major currencies, while gold prices fell.

Light, sweet crude rose $1.55 to $52.32 a barrel on the New York Mercantile Exchange.

The data arriving Wednesday underscored investors lingering concerns about the economy, though the market's reaction could be skewed by light trading volume ahead of the holiday. Markets are open for a shortened session on Friday — the unofficial start of the holiday shopping season.

Investors are nervous that consumers will be reluctant to open their wallets during the holidays. The season, which accounts for as much as 40 percent of annual profits for many stores, is expected to be the weakest in decades, as consumers grapple with rising unemployment and a drop in household wealth.

A sharp decline in consumer spending, which accounts for more than two-thirds of U.S. economic activity, has been among Wall Street's biggest concerns in the past few months as unemployment has risen and the stock market has tumbled.

In another sign that retailers are struggling, luxury goods company Tiffany & Co. warned Wednesday that 2008 results would come in below Wall Street's expectations, though it posted a better-than-expected third-quarter profit. The company also plans to cut jobs and trim capital spending as it expects weak demand to continue in the fourth quarter. Tiffany fell 87 cents, or 4.2 percent, to $19.96.

In other corporate news, American International Group Inc. said it received $40 billion from the Treasury Department as part of the government's latest plan to help the embattled insurer stay in business. The money is part of a $150 billion financial-rescue package that the government pledged to AIG earlier this month. AIG slipped a penny to $1.76.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 201.5 million shares.

Overseas, Japan's Nikkei stock average fell 1.33 percent. In afternoon trading, Britain's FTSE 100 fell 2.10 percent, Germany's DAX index fell 1.37 percent, and France's CAC-40 fell 2.03 percent.