By Tomi Kilgore
U.S. stocks edged higher, erasing opening losses, as investors
shrugged off disappointing housing market data and as jitters over
Iraq eased.
The Dow Jones Industrial Average advanced 19 points, or 0.1%, to
16800. The Dow was down as much as 48 points soon after the open
before rebounding.
The S&P 500 index tacked on three points, or 0.1%, to 1941.
The index was now just 0.5% below its June 9 record high close of
1951.27. The Nasdaq Composite Index climbed 19 points, or 0.4%, to
4340.
Small-company stocks outperformed the broader market for a
second straight session, a sign that investors were perceiving less
risk in the market. The Russell 2000 index of small-cap companies
rose 0.8%, adding to a 0.4% gain in the previous session.
While the turmoil in Iraq remained in the headlines, the tension
in the market appears to have eased as oil prices declined, and
some safe-haven investments like gold and U.S. Treasurys pulled
back.
Crude-oil futures gave up 0.3% to $106.64 a barrel. Gold futures
lost 0.7% to $1,267 an ounce, after rising Monday for a sixth
straight session, while the yield on the 10-year Treasury note
edged up to 2.646% from 2.599% late Monday. Yields rise as Treasury
prices fall.
"We've turned our attention away from the Middle East for the
moment," said Joseph Quinlan, chief market strategist at U.S.
Trust, Bank of America Private Wealth Management. "I believe
everyone is focused on the Fed's meeting" on Wednesday.
Earlier, data showed that new residential construction for May
declined 6.5% to a seasonally adjusted annualized rate of 1 million
units, below expectations of 1.03 million. Building permits, which
are an indicator of future construction, slid 6.4% to a 991,000
annual rate versus an estimate of 1.04 million.
Separately, the consumer-price index for May climbed 0.4% on the
month, compared with expectations of a 0.2% increase. Excluding
food and energy components, core CPI rose 0.3%, compared with
expectations of a 0.2% rise.
Investors will be looking ahead to the release of the Federal
Reserve's policy statement on Wednesday. The Fed is widely expected
to announce another $10 billion reduction in its highly-stimulative
bond-buying program to $35 billion a month. But investors will be
looking for any changes in the Fed members' economic projections
that might influence policy going forward.
"There's some positioning [by investors] related to a potential
surprise, but I believe it will be steady as she goes," Mr. Quinlan
said.
European stocks edged higher as investors digested mixed
economic data. The Stoxx Europe 600 was up 0.2% after shedding 1.3%
in the past two sessions. Annual inflation in the U.K. slowed in
May to the lowest rate in five years, while investor confidence in
Germany declined for a sixth-straight month despite expectations
for a rise.
Asian markets were mostly lower, with China's Shanghai Composite
declining 0.9%. Japan's Nikkei Stock Average bucked the trend by
rising 0.3%.
In corporate news, Dow component AT&T gained 0.3% after The
Wall Street Journal reported the company will be the exclusive
carrier for the new smartphone from Amazon.com Inc. The phone is
expected to be unveiled on Wednesday. Amazon edged up 0.2%.
Kindred Healthcare Inc. dropped 2.7% after the company increased
its offer to buy the home health and hospice company Gentiva Health
Services to $14.50 a share from $14 a share, raising the value of
the deal to about $534 million in cash. Gentiva's stock rallied
4.4%.
Netflix climbed 3.5% after analysts at Morgan Stanley turned
bullish on the stock, citing the company's long-term profit
potential and belief that revenue will rise past current
expectations. The firm now rates Netflix overweight, up from a
previous rating of equal weight, and has a target of $500 on the
stock.
Write to Tomi Kilgore at tomi.kilgore@wsj.com