Wall Street mixed as investors sell large-caps

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NEW YORK -- Wall Street ended mixed Tuesday, selling off large companies' stocks but buying up those of smaller companies, as investors cashed in gains from Monday's big rally and poked around for new bargains.

It was an unusual day of trading -- normally, the major stock indexes closely track one another. But given the market's quick, sharp rebound from August's credit market squeeze and stock selloff, it's understandable investors would pause to reposition as the fourth quarter gets under way.

Wall Street was only slightly fazed by the National Association of Realtors' report Tuesday that its seasonally adjusted index of pending sales for existing homes fell 6.5% in August from July and 21.5% from a year ago. The data suggest sales of existing homes will probably keep declining in the coming months -- bad news for the economy, but good news for those hoping for another interest rate cut.

After the Federal Reserve lowered rates on Sept. 18, the stock market is hoping for a similar move again at the Fed's Oct. 30-31 meeting. That optimism drove the Dow Jones industrial average up nearly 192 points Monday to close at 14,087.55 -- a new high and its first foray above the 14,000 level since mid-July, right before stocks plunged on worries related to subprime mortgages and overly leveraged debt.

"The economy is soft, you have this big run-up, and the fact is people are just taking some profit," said Scott Fullman, director of investment strategy for I. A. Englander & Co. "There's not a ton of news to trade on, and investors are also looking ahead to the unemployment report on Friday."

The Dow fell as investors sold some of their large-cap stock holdings, which have recently performed well. Also, with commodities prices retreating and the dollar rebounding, big mining and oil companies -- such as Dow component Exxon Mobil Corp. -- may see dampened profits. Small-cap stocks rose, along with homebuilders, airlines and brokerages, as investors returned to companies that were unattractive during the summer's tight credit environment and now appear cheap.

"Larger-cap companies don't need to do borrowing. After the rate cut, those who believe there will be another rate cut would want own smaller-cap stocks," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.

According to preliminary calculations, the Dow fell 40.24, or 0.29%, to 14,047.31.

The broader Standard & Poor's 500 index fell 0.41, or 0.03%, to 1,546.63, while the tech-dominated Nasdaq composite index rose 6.12, or 0.22%, to 2,747.11.
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