Stocks Struggle as Rates Jump

Interest rate concerns stifled Wall Street’s attempt to revive its November rally Tuesday, even as the market drew support from upbeat reports on factory orders, housing demand and consumer confidence.

The positive economic data stoked the market at the opening, but the gains were limited by a bond sell-off as traders grew worried that a strengthening economy would give the Federal Reserve reason to continue its rate-tightening campaign.

The Dow Jones industrial average edged down 2.56 points to 10,888.16, after gaining almost 70 points early in the session.

Broader stock indicators finished mixed. The Standard & Poor’s 500 inched up 0.02 point to 1,257.48, while the Nasdaq composite fell 6.66 points, or 0.3%, to 2,232.71.

But advancing issues outpaced decliners by 19 to 14 on the New York Stock Exchange.

On Monday, the market ended a seven-day winning streak that carried the S&P; 500 and Nasdaq indexes to 4 1/2 -year highs. But many analysts say the market was overbought and needed a break.

Signs of strong economic growth in Tuesday’s reports sent Treasury bond yields higher, with the benchmark 10-year T-note surging to 4.48% from 4.40% on Monday.

Shorter-term yields in the Treasury market also rose Tuesday, but the difference between short- and long-term rates continued to narrow -- a sign, some analysts say, that bond investors believe the Fed might tip the economy into recession if it continues to tighten credit.

The yield on the 2-year T-note ended at 4.39%, just 0.9 point less than the 10-year T-note yield.

Historically such a “flattening� of Treasury bond yields has been a warning sign of economic weakness ahead.

The Commerce Department said orders for big-ticket manufactured goods grew 3.4% in October, with increased demand for military aircraft and parts accounting for more than half of the $7.1-billion gain.

The department also reported that new-home sales grew 16.5% to 1.42 million in October, beating forecasts for 1.2 million and July’s record of 1.35 million. A recovery in the Western housing market led the growth, the department said,

The bond market ignored the latest decline in energy prices. Crude futures turned lower as mild weather pervaded the Northeast, although temperatures are expected to plunge later this week.

A barrel of light crude dropped 86 cents to settle at $56.50 in New York trading.

In other market highlights:

* The Russell 2,000 index of smaller stocks added 0.3% after diving 1.8% on Monday.

* Profit takers slammed Google, the Internet search giant that has been a leader in this year’s market rally. The stock plunged $19.94, or 4.7%, to $403.54. Yahoo lost 92 cents to $40.19. Google still is up 109% this year; Yahoo is up 7%.

* Steel stocks rallied after brokerage JP Morgan said U.S. Steel was undervalued. U.S. steel jumped $2.75 to $45.24, Nucor gained $1.69 to $66.64 and Steel Dynamics rose 85 cents to $34.75.

* Energy stocks were mixed as oil fell. ConocoPhillips lost 44 cents to $61.29, but EOG Resources rallied $2.15 to $71.04 and Marathon Oil rose 74 cents to $58.61.

* Home builders’ shares also were mixed, despite the strong new-home sales report. KB Home inched up 1 cent to $69.64, while Lennar was off 21 cents to $57.44.

* Perris-based National R.V. Holdings slumped 48 cents to $5.72. The company’s board rejected a $6.25-a-share takeover offer made by a group including the firm’s founder. National R.V. said the offer was “inadequate.�

* Anheuser-Busch rose 69 cents to $44.70 after saying it still expected full-year earnings to decline by 10% to 11%, as cost pressures cut into the company’s profit. But Anheuser-Busch added that it expected profit to start growing again in 2006.