Investors picked up shares of consumer product makers and industrial companies Wednesday but remained cautious after getting more evidence that the US economy is still struggling.
Money flowed into stocks like Procter & Gamble Co. seen as better able to weather a recession but technology shares slumped after Intel Corp.'s tightlipped forecast caused jitters about a corner of the market that has been drawing in buyers over the past month.
In midafternoon trading, the Dow Jones industrial average rose 14.89, or 0.2 percent, to 7,935.07.
More stocks rose than fell but the advance was held in check after the government reported that production at America's factories, mines and utilities fell 1.5% in March, the fifth straight month of decline and worse than the 1% dip analysts expected.
The government reported separately that consumer prices fell 0.1% last month as a drop in energy prices offset the biggest rise in tobacco prices in more than a decade. It was better than the 0.1% rise economists had expected but still reflected weaker business activity.
Investors showed little lasting reaction to a Federal Reserve snapshot of business conditions around the US that offered some signs that the recession could beginning to ease its grip on the economy.
Traders are hesitant to continue a five-week buying spree that has boosted the market more than 20% without more convincing signs that the economy is stabilizing or until companies signal they have seen the worst of a recession now in its 17th month.
David Kelly, chief market strategist at JPMorgan Funds, said it could take months for investors to get a better sense of whether the US economy has managed to break its slide.
"It's like April weather," he said. "Some days it will seem an awful lot like winter and other days it will feel like spring."
The Standard & Poor's 500 index fell 1.82, or 0.2%, to 839.68. The tech-heavy Nasdaq composite index fell 19.92, or 1.2%, to 1,605.80, reflecting disappointment about Intel's report.
About four stocks rose for every three that fell on the New York Stock Exchange, where volume came to 856.9 million shares.
Investors bought industrial stocks after cost-cutting at CSX Corp. helped the railroad operator post better-than-expected earnings for the first three months of the year. The stock rose $1.75, or 6.2%, to $30.14.
Consumer staples stocks - considered a refuge during recessions - posted some of the biggest gains. Procter & Gamble, the maker of Tide detergent and Crest toothpaste, rose $1.39, or 2.9%, to $48.64 after boosting its quarterly dividend by 10%, to 4 cents.
Dr Pepper Snapple Group Inc. rose 19 cents, or 1%, to $19.55 after an analyst added the drink maker to a list of highly rated stocks.
American Airlines parent AMR Corp. jumped 74 cents, or 18%, to $4.96 after the carrier's $375 million loss for the first quarter wasn't as bad as analysts had feared.
Home builder stocks rose after the National Association of Home Builders said its housing market index posted its biggest one-month gain in five years in April as many homebuyers seized on lower prices and incentives.
Hovnanian Enterprises Inc. jumped 26 cents, or 13.9%, to $2.13, while Toll Brothers Inc. rose 57 cents, or 3.2%, to $18.66.
Intel pushed tech companies lower. The chip maker's earnings came in well ahead of expectations and the company said personal computer sales have "bottomed out."
Investors were unnerved, though, by Intel's decision not to provide a detailed revenue forecast. The company said the economy makes it too hard to accurately predict results. The stock fell 67 cents, or 4.2%, to $15.34.
"We're going to continue to get bad news," said David Hefty, chief executive of Cornerstone Wealth Management in Auburn, Indiana. Hefty noted, though, that investors are less swayed right now by fundamentals in the economy and more by the momentum of the market.
In a sign of further weakness in the economy, Yahoo Inc. and the troubled Swiss bank UBS are both cutting jobs.
Yahoo is planning to cut several hundred jobs in its third round of big layoffs in 14 months, a person familiar with the plans said. Details of the cuts are unlikely to be released before the company announces first-quarter results on Tuesday. Yahoo slipped 28 cents, or 2%, to $13.79.
UBS said it will cut 8,700 jobs worldwide by the end of next year and expects a first-quarter loss of nearly $1.75 billion. UBS fell 33 cents, or 3%, to $10.86.
The UBS results put a damper on improving bank earnings that were seen at Wells Fargo & Co. and Goldman Sachs Group Inc. Both Citigroup Inc. and Bank of America Corp., among the hardest hit by the credit crisis, report first-quarter results within the next week.
Worries about the banking system remain in particular even though Goldman Sachs Group Inc. reported earlier this week a better-than-expected profit of $1.66b. for the first quarter and said it was looking to raise $5b. via a rights issue to help pay back the $10b. it took from the US government last autumn in the Troubled Asset Relief Program (TARP).
Goldman Sachs appears to have set the bar high for the other big US banks due to report earnings in the coming couple of weeks, including JPMorgan Chase & Co. and Citigroup Inc.
In other market moves, the Russell 2000 index of smaller companies rose 0.42, or 0.1%, to 453.64.
Bond prices rose, pushing the yield on the 10-year Treasury note down to 2.77% from 2.79% late Tuesday.
The dollar was mixed against other major currencies, while gold prices rose.
Markets closed lower Wednesday as recent buying enthusiasm continued to be tempered by downbeat economic news out of the US.
The FTSE 100 index of leading British shares closed down 20.59 points, or 0.5%, at 3,968.40, while Germany's DAX fell 7.22 points, or 0.2%, to 4,549.79. The CAC-40 in France was 14.48 points, or 0.5%, lower at 2,965.74.
Japan's benchmark Nikkei 225 stock average lost 99.72 points, or 1.1%, to 8,742.96 and South Korea's Kospi fell 9.54, or 0.7%, to 1,333.09. Stock averages in Australia and Taiwan also fell.
Benchmarks in China, Hong Kong and Singapore managed to climb into positive territory. Hong Kong's Hang Seng closed up 89.46 points, or 0.6%, at 15,669.62. India's Sensex shot up 2.3% to 11,214.62.
Hopes that an improvement in the global economy may emerge soon have enticed some investors back into stock markets in recent weeks. The rise in risk appetite has gained momentum over the last month or so as global equities have rallied from multiyear lows to post their biggest gains in such a short space of time since 1933.
However, most investors are fully aware the world economy is not in the clear yet and that stock market losses may return soon.
"Without a second half recovery already in the works, the equity market appears over-bought and a correction back towards the 750 level on the S&P is likely," said Steve Ricchiuto, chief economist at Mizuho Securities.
"This correction should be seen as part of a long bottoming process that will probably retest the early March lows at least once, if not several times before a sustained uptrend can be established," he added.
The dollar rose to 99.32 yen from 98.98 yen before recovering to 99.12, while the euro fell to $1.3204 around $1.3250.
Oil prices continued to hover around $50 a barrel. By early afternoon London time, benchmark crude for May delivery was down 9 cents $49.32 a barrel in electronic trading on the New York Mercantile Exchange. The contract on Tuesday fell 64 cents to settle at $49.41.