Street fights drop in consumer confidence

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NEW YORK -- Wall Street struggled to find a direction Tuesday after a slight decline in May new home sales provided investors with some relief but little reason to rally.

The Commerce Department reported that sales of new homes fell 1.6% in May to a seasonally adjusted annual rate of 915,000. It was the fourth decline in the past five months -- in April, new home sales had jumped by 12.5% -- but a milder decrease than many anticipated.

Investors were a bit unnerved by a larger-than-expected drop in the Conference Board's index on consumer confidence, and still jittery about ongoing subprime lending troubles and what the Federal Reserve might say when it makes its decision on interest rates Thursday. Central bankers are widely expected to keep the benchmark rate steady at 5.25%, but Wall Street will be watching to see if they alter their stance on inflation, which could suggest a rate cut or rate hike later in the year.

"There's a lot to keep people busy," said Scott Fullman, director of investment strategy for I.A. Englander & Co. "All of these issues are really coming into play, as we're seeing with the volatility in the market. It's going to go on for a little while longer until the market has a reason to settle down."

The Dow Jones industrial average and Standard & Poor's 500 index reached record closes earlier in June, but have been lurching up and down in recent weeks after a surge in Treasury yields raised concerns about the Fed's rate policy.

In late morning trading, the Dow rose 32.51, or 0.24%, to 13,384.56.

Broader stock indicators also rose. The S&P 500 rose 1.06, or 0.07%, to 1,498.80, and the Nasdaq composite index slipped 0.02, or less than 0.01%, to 2,577.06.

Bonds slipped after the new home sales data, with the yield on the benchmark 10-year Treasury note rising to 5.10% from 5.08% late Monday.

Earlier Tuesday, the Standard & Poor's home price index for April showed which declined for the 17th consecutive month, and showed its steepest annual decline since 1991.

Investors got yet another update on the status of the housing industry after homebuilder Lennar Corp. posted a loss for the second quarter as the housing downturn continues, and warned that a third-quarter loss is likely. Lennar fell 65 cents to $38.10, and other homebuilders followed.

Lennar Chief Executive Stuart Miller warned that "the housing market has continued to deteriorate throughout the second quarter. The supply of new and existing homes has continued to increase resulting in declining home prices across our markets."

A spate of dealmaking news failed to rally the broader stock market.

Basell, a division of billionaire investor Leonard Blavatnik's Access Industries, said Tuesday it will acquire rival chemical company Huntsman Corp. in a cash deal worth $5.6 billion. Huntsman soared $5.31, or 28%, to $24.21.

Late Monday, Spanish power company Iberdrola SA said it plans to buy utility owner Energy East Corp. for $4.5 billion in cash. Energy East surged $3.98, or 17.7%, to $26.52.

Investment management company BlackRock Inc. said is buying the fund of funds division of Quellos Group LLC for up to $1.7 billion. The deal, set to close around Oct. 1, will create a fund of funds operation with more than $25.4 billion in managed assets. BlackRock rose $2.37 to $156.90.

And Ventana Medical Systems Inc. surged $25.25, or 49%, to $76.99 after Roche Holding AG made a $3 billion hostile bid for the medical testing products maker.

The excitement over private equity has waned a bit, and Blackstone Group LP tumbled for a second straight day Tuesday after the firm's initial public offering last week. Blackstone slumped $1.68, or 5.2%, to $30.76.

The dollar was lower against other major currencies, while gold prices fell.

Crude oil futures for August dropped $1.11 to $68.07 a barrel on the New York Mercantile Exchange.

Declining issues narrowly outnumbered advancers on the New York Stock Exchange, where volume came to 557.3 million shares.

The Russell 2000 index of smaller companies was down 1.44, or 0.18%, at 825.99.

Overseas, Japan's Nikkei stock average fell 0.12%. In afternoon trading, Britain's FTSE 100 was down 0.26%, Germany's DAX index was down 1.03%, and France's CAC-40 was down 0.72%.
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