Stocks finish slightly higher despite housing data

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Stocks have ended an erratic session with a slight gain as rising commodities prices offset disappointment over an unexpected drop in home sales.

Gains in commodities have driven shares of energy and materials-producing companies higher. Gold, oil and other commodities are rising in response to a weaker dollar.

The dollar is down after four days of gains as the latest economic data reinforce investors’ belief that the recovery will be slow. The Commerce Department says sales of new homes plunged 11.3 percent in November to their lowest level since March.

According to preliminary calculations, the Dow Jones industrial average is up about 1 at 10,466. The Standard & Poor’s 500 index is up 2 at 1,120, while the Nasdaq composite index is up 12 at 2,269.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

NEW YORK (AP) — Stocks were heading to a narrowly mixed finish Wednesday as rising commodities prices offset losses that followed a disappointing report on housing.

Gains in commodities drove the shares of energy and materials-producing companies higher, helping to underpin the market. Gold, oil and other commodities rose as the dollar dropped.

The dollar snapped a four-day winning streak as new data on housing and consumer spending reinforced investors’ belief that the recovery will be slow.

The Commerce Department said sales of new homes plunged 11.3 percent in November to their lowest level since March.

The slump in new home sales was disappointing for two reasons — economists had forecast an increase, and the news came a day after stocks climbed higher on a separate report showing a better-than-expected gain in sales of existing homes last month.

“I’m surprised the market isn’t down more,” said Thomas Villalta, co-portfolio manager of the Jones Villalta Opportunity Fund. “I was thinking this would be a good excuse for a sell-off.”

Villalta noted that existing home sales have been cannibalizing the sales of new homes somewhat as steep discounts on distressed and foreclosed properties ramp up sales volume.

Positive signs of recovery in the housing industry have been one of the most encouraging factors for investors in recent months, and the market is quick to respond when the news turns bad.

The weakness in housing followed news that personal spending and income both rose in November. However, economists say the growth remains too weak to sustain a strong economic recovery.

In late afternoon trading, the Dow Jones industrial average rose 0.83, or 0.01 percent, to 10,465.76. The Standard & Poor’s 500 index rose 2.47, or 0.2 percent to 1,120.49, while the Nasdaq composite index rose 16.80, or 0.8 percent, to 2,269.47.

The ICE Futures U.S. dollar index, which measures the dollar against other currencies, tumbled 0.5 percent after four days of gains. The decline in the dollar made commodities cheaper for foreign buyers. Oil surged more than 3 percent, rising $2.27 to $76.67 a barrel on the New York Mercantile Exchange. Gold prices also rose.

Earlier Wednesday, the Commerce Department reported that personal income rose at the fastest rate in four months, allowing them to increase their spending for the second straight month. Personal incomes rose 0.4 percent, helped by higher wages, while spending rose 0.5 percent. Both figures fell slightly short of the expectations of analysts polled by Thomson Reuters.

The rise in income reflects a decline in the unemployment rate last month to 10 percent. Treasury Secretary Timothy Geithner said on ABC’s “Good Morning America” that it is reasonable to expect employers will start adding jobs by the spring.

Wall Street’s mild reaction to Wednesday’s economic data could also be due to the fact there are few alternatives for investors right now.

Tim Courtney, chief investment officer at Burns Advisory Group, said other investments like bonds and commodities are “extremely expensive” when compared to stocks.

The cost of buying a 10-year Treasury note to lock in yearly gains just above 3.5 percent does not provide as much value as stocks whose gains could be sharply higher, he said. Gains on Treasurys could be further eroded if inflation starts to pick up as the economy recovers as well.

Bond prices were mostly higher Wednesday following three days of declines. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.75 percent from 3.76 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, was steady at 0.06 percent.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 576.3 million shares, compared with 650.5 million traded at the same point Tuesday.

Trading volume on the New York Stock Exchange has been especially light throughout the month, which can exaggerate price swings. Volume has eclipsed its 200-day moving average only three times so far in December.

The Russell 2000 index of smaller companies rose 6.39, or 1.0 percent, to 629.99.

Overseas, Britain’s FTSE 100 gained 0.8 percent, Germany’s DAX index gained 0.2 percent, and France’s CAC-40 rose 0.3 percent. The DAX and CAC-40 both hit highs for the year earlier in the day. Markets in Japan were closed for a holiday.

Copyright 2009 The Associated Press.