The Dow industrials rose to a record high close on Tuesday, as signs of stabilising inflation raised the prospect of lower interest rates, boosting the outlook for business investment. But the Dow ended well off its highs of the day and the S&P 500 index and the Nasdaq declined as disappointing results from some retailers and a report showing US home builder confidence fell in May raised concerns about consumer spending.
Shares of capital-intensive industrial conglomerates including 3M Co and Boeing Co were among the biggest drivers of the Dow, which rose more than 100 points during the session and crossed the 13,400 level before paring gains.
The government reported that the Consumer Price Index last month, excluding volatile food and energy, showed the smallest 12-month increase since April 2006. Investors had worried that if inflation proved stubborn, the Federal Reserve would have to raise interest rates.
"The fact that the data comes on the heels of a continued high level of takeover activity, that's given the market a bit of a lift," said David Katz, chief investment officer at Matrix Asset Advisors.
The Dow Jones industrial average rose 37.06 points, or 0.28 percent, to end at 13,383.84, a record close. The Standard & Poor's 500 Index was down 1.96 points, or 0.13 percent, at 1,501.19. The Nasdaq Composite Index was down 21.15 points, or 0.83 percent, at 2,525.29.
The Dow also hit a record intraday high of 13,481.60. The blue chip index's multiple record highs in recent weeks have been fuelled by stronger-than-expected profits in the first quarter, along with take-overs. The S&P 500 has enjoyed six straight weeks of gains.
"Markets seem to be getting stretched pretty thin on the upside. We had a consistent rally, and the action in the last couple of days is not particularly good, with declining volume and other indicators," said David Straus, a portfolio manager with Johnston Lemon in Washington D.C.
Biotech company Amgen Inc weighed on both the Nasdaq and the S&P 500 indexes, falling 3.7 percent to $54.01 after Medicare proposed limiting payments for its anemia drugs in response to safety concerns.
Retail heavyweights Home Depot Inc and Wal-Mart Stores Inc reported lacklustre earnings. Home Depot shares dropped 1.8 percent to $38.30 on the New York Stock Exchange after the largest US home improvement chain's profit missed estimates. Wal-Mart shares fell 0.5 percent to $47.62 after the company said second-quarter profit could trail estimates.
3M shares rose 1.6 percent to $86.17 on the NYSE, while shares of Boeing advanced 0.8 percent to $94.34. General Electric Co stock was up 0.1 percent at $36.64 after GE Chief Executive Jeff Immelt said in interview with Reuters the US economy was on solid footing despite a slowing housing market.
Shares of General Motors Corp rose 4.4 percent to $31.97 after Lehman Brothers upgraded the stock. Lehman cited DaimlerChrysler's deal to sell its beleaguered Chrysler unit as a positive for GM, among other factors.
Trading was active on the NYSE, with about 1.65 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq about 2.26 billion shares traded, above last year's daily average of 2.02 billion. Declining stocks outnumbered advancing ones by a ratio of about 5 to 3 on the NYSE and by 7 to 3 on Nasdaq.
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