NEW YORK (AP) --
Investors remained concerned that higher energy and food prices will curb consumer spending, which makes up more than two-thirds of the U.S. economy. The latest report from the Commerce Department showed that retail sales fell in April, increasing worries about a recession. The report, which was in line with economists' expectations, did show better-than-expected sales if automobiles are excluded. However, that still indicates Americans are reluctant to make big-ticket purchases - especially as soaring fuel prices cut into demand.
Meanwhile, Bernanke said during a speech at a Fed conference in Atlanta that turmoil in financial markets has eased somewhat, but the situation is still "far from normal." He noted some improvements in the markets for certain mortgage-backed securities, such as those backed by Fannie Mae and Freddie Mac, as well as some fixed-rate mortgages and corporate debt.
Though the data and Bernanke's comments were interpreted as being largely positive for the market, analysts said they weren't enough to ease concerns about the overall economy. Brian Gendreau, investment strategist for ING Investment Management, believes investors won't really get a clear picture until more economic data is released in June and July.
"We're going to go through a period where the markets are going to focus on the macro-data, and any adverse piece of news about the credit markets," he said. "It will be a trendless market until the uncertainties about a contraction in economic activity are resolved."
Major stock indexes pushed to session lows after Iranian news services reported Iran is considering a cut to output. That caused oil prices to spike to a record $126.98 a barrel on the New York Mercantile Exchange; they slipped back somewhat but were still up $1.59 a barrel at $125.82. Retail gasoline rose to a record national average price over $3.73 a gallon.
In late afternoon trading, the stock market turned mixed after trading lower earlier in the day. The Dow Jones industrial average fell 19.54, or 0.15 percent, to 12,856.77, having soared 130 points on Monday.
Broader indexes recovered. The Standard & Poor's 500 index rose 2.42, or 0.17 percent, to 1,406.00, and the Nasdaq composite index rose 9.28, or 0.37 percent, to 2,497.77.
The technology-heavy Nasdaq got a boost as Yahoo Inc. rose after CNBC reported billionaire investor Carl Icahn was considering a proxy fight to try to push Yahoo back into merger discussions with Microsoft Corp.
Yahoo rose $1.17, or 4.6 percent, to $26.43.
The better-than-expected retail sales report knocked Treasury prices lower. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.90 percent from 3.80 percent late Monday.
In addition to retail sales, the Commerce Department also reported that businesses added to their inventories in March by the smallest amount in a year, another indication of a weakening economy. Inventories edged up a tiny 0.1 percent in March, the smallest advance since they were basically flat in March 2007.
In corporate news, investors pored over a number of high-profile acquisitions, including Hewlett-Packard Co.'s offer to buy Electronic Data Systems Corp. for $12.6 billion. In addition, Staples Inc. raised its hostile bid to acquire Dutch rival Corporate Express NL.
The deal to combine Hewlett-Packard with EDS will create the second-largest technology services provider behind International Business Machines Corp. EDS shares added 28 cents to $24.36, while Hewlett-Packard fell $2.07, or 4.4 percent, to $44.77.
Staples rose 36 cents to $22.32 after the office supply retailer sweetened its offer price by 10 percent. Corporate Express said it is willing to consider the deal.
Investors got another read on the consumer after Wal-Mart Stores Inc. reported first-quarter profit above Wall Street forecasts. However, the world's largest retailer, often a barometer of consumer spending in the U.S., forecast that the current quarter will come in below expectations.
Wal-Mart fell $1.32 to $56.90.
Luxury home builder Toll Brothers Inc. said preliminary results show homebuilding revenue fell 30 percent in its fiscal second quarter amid a weak spring selling season. The company also expects to continue to face "challenging times" ahead, given soft conditions in most markets. Shares shed 39 cents to $22.97.
The Russell 2000 index of smaller companies rose 4.08, or 0.56 percent, to 737.31.
Advacing issues narrowly beat decliners on the New York Stock Exchange, where volume came to 873.3 million shares.
Overseas, Japan's Nikkei stock average fell 1.53 percent. Britain's FTSE 100 slid 0.14 percent, Germany's DAX index rose 0.34 percent, and France's CAC-40 rose 0.45 percent.
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