Wall Street ended mixed Tuesday, selling off large companies' stocks but buying up those of smaller companies, as traders cashed in gains from Monday's big rally and poked around for new bargains.
According to preliminary calculations, the Dow fell 40.24, or 0.29 percent, to 14,047.31.
The broader Standard & Poor's 500 index fell 0.41, or 0.03 percent, to 1,546.63, while the tech-dominated Nasdaq rose 6.12, or 0.22 percent, to 2,747.11.
The Russell 2000 index of smaller companies rose 7.23, or 0.88 percent, to 831.97.
It was an unusual day of trading -- normally, the major stock indexes closely track one another, but Tuesday, the Dow Jones industrials closed with a moderate loss while the Nasdaq composite had a moderate gain. Given the market's quick, sharp rebound from August's credit market squeeze and stock selloff, it was to be expected that investors would pause to adjust their portfolios 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 percent in August from July and 21.5 percent 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 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.(XON) -- 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.
Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where volume came to 1.27 billion shares.
Government bond prices rose as the Dow pulled back. The 10-year Treasury note yield, which moves inversely to its price, fell to 4.53 percent from 4.56 percent late Monday.
The dollar rebounded from record lows versus the euro, and also recovered some ground against the pound and the Canadian dollar. Gold, which has recently hit multi-decade highs, tumbled under pressure from the rising dollar; an ounce of gold fell $17.80 to $736.30 on the New York Mercantile Exchange.
Crude oil futures on the Nymex also declined, slipping 19 cents to $80.05 a barrel. Many analysts say oil's September rally to record levels above $83 a barrel was due to speculative buying by investors taking advantage of the weak dollar. A stronger dollar makes commodities more costly to foreign buyers.
Expectations that oil and gold will fall further hurt energy and mining company stocks. Exxon Mobil fell $1.71 to $92.24; ConocoPhillips (COP) fell $1.77, or 2 percent, to $85.62; Chevron Corp. (CVX) fell $1.88, or 2 percent, to $92.56. Barrick Gold Corp. (ABX) dropped $1.98, or 4.8 percent, to $39.25, and Harmony Gold Mining Ltd. (HMY) fell 83 cents, or 7 percent, to $11.07.
Meanwhile, top automakers' September sales came in mixed.
General Motors Corp. (GM) was the biggest gainer among the 30 Dow components, rising $1, or 2.8 percent, to $37.05 after reporting that its September U.S. sales rose slightly on stronger demand for its light trucks and crossover vehicles.
But Ford Motor Co.'s (F) U.S. sales plummeted 21 percent in September on deep cuts in sales to car rental agencies. Still, its stock rose 34 cents, or 4.1 percent, to $8.57, on an anticipated new contract with union workers.
In other corporate news, a group of investors reduced its cash offer for SLM Corp.(SLM), known as Sallie Mae, by 17 percent, and SLM insisted that the buyers honor their original $25 billion deal. SLM rose 19 cents to $50.09.
Acquisitions are still happening, though, despite a tighter-than-normal credit market.
Canada-based TD Bank Financial Group (TD) agreed to buy Commerce Bancorp Inc. (CBH) in a cash-and-stock deal valued at $8.5 billion. The news got a lukewarm reception: Commerce fell 35 cents to $39.47, and Toronto Dominion fell $4.29, or 5.6 percent, to $72.65.
And Citigroup Inc. (C) said it is buying the rest of Nikko Cordial Corp. for shares valued at about $4.6 billion. The bank already owned a 68 percent stake in Japan's third-largest brokerage. Citigroup, which estimated Monday that its third-quarter profit will drop 60 percent, rose 14 cents to $47.86.
Overseas, Britain's FTSE 100 fell 0.09 percent, Germany's DAX index rose 0.31 percent, and France's CAC-40 rose 0.45 percent. Japan's Nikkei stock average closed up 1.19 percent.