New York: US stocks ended flat to lower in an erratic session on Tuesday after the Federal Reserve inched closer to further steps to spur the economy.
Stocks initially popped higher but gave back those gains quickly. Investors had hoped that with recent improvements in economic data, the Fed would issue a more upbeat outlook or clarify the measures it would take to stimulate demand.
Stocks had hit their highest levels on Monday since May, after economists said the recession officially ended in June 2009.
The central bank nudged the door wider to pumping more money into the economy but kept overnight interest rates unchanged near zero, as expected. The Fed also said the recovery has slowed over the last few months but that it do what it needed to support the recovery, meaning that it would buy bonds if it needed to stimulate the economy.
With the S&P 500 up about 9% percent this month, investors still felt a conflict whether a move by the Fed would be enough to put the economy on a path to sustainable growth.
“One interpretation would be that things are deteriorating and therefore they need to do more. On the other hand, the favorable aspect of it would be they’re going to print more money to boost asset prices,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
The confusion can be seen in disparate classes of investments rallying simultaneously, with bond prices rising alongside stocks in recent days.
Volume picked up after the announcement but was still light, with 8.03 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq. Last year’s estimated daily average was 9.65 billion shares.
The CBOE Volatility Index .VIX, a measure of investor sentiment, climbed 4%, while declining stocks outnumbered advancing ones on the NYSE by a ratio of almost two to one. On the Nasdaq, eight stocks fell for every five that rose.
The Dow Jones industrial average .DJI was up 7.41 points, or 0.07%, at 10,761.03. The Standard & Poor’s 500 Index .SPX was down 2.93 points, or 0.26%, at 1,139.78. The Nasdaq Composite Index .IXIC was down 6.48 points, or 0.28%, at 2,349.35.
White House economic adviser Larry Summers is stepping down from his job at the end of the year to return to a teaching job at Harvard, the administration said late Tuesday.
The Dow was lifted by heavy machinery maker Caterpillar Inc, which climbed 2.2% to $76.39.
Adobe Systems Inc fell 15% to $28.25 in extended trading after the software company gave a revenue outlook that missed expectations.
Online auction site eBay Inc rose 0.6% to $24.90 after it forecast third-quarter earnings near the high end of its outlook.
In Monday’s session, the S&P 500 broke through a key technical range to close at a four-month high, though some analysts were skeptical about Monday’s breakout above 1,130, the upper end of a range that has persisted since June.
Sectors that had rallied recently, including technology and materials shares, gave back some gains on Tuesday. Dow components Microsoft Corp fell 1.1% to $25.15 while Alcoa Inc lost 1.9% to $11.17.
The government said US housing starts increased in August to their highest level in four months, while permits for future construction rose, suggesting the embattled housing market was starting to stabilize.
After rising, the Dow Jones home construction index .DJUSHB edged down 0.25%, and homebuilder D.R. Horton Inc slipped 7 cents to $10.98.
“It was very encouraging to see how strong the number was, but much of the strength was in multifamily homes, and that tends to be a volatile measure,” said Ed Crotty, chief investment officer at Davidson Investment Advisors in Great Falls, Montana.
Airline shares rose, with the ARCA airline index .XAL advancing 1.9% after a trade group forecast global airlines will likely post sharply higher 2010 profits.
In world markets, European indices ended down for the day, while Asian markets ended mixed.