By STEVE ROTHWELLAP Markets Writer
NEW YORK (AP) - Stock indexes were moving between small gains and losses in early afternoon trading Tuesday as a rise in Treasury yields held back homebuilders and other stocks that are sensitive to changes in interest rates.
The yield on the 10-year note climbed close to its highest in two years amid signs that that Europe will emerge from recession and on speculation that the Federal Reserve will cut its stimulus to the economy.
Homebuilders slid on concern that mortgage rates will climb, curbing a recovery in the housing market. The stocks of phone companies and utilities that typically pay big dividends also fell. These stocks have been slumping as Treasury yields have risen, diminishing their appeal as sources of investment income.
Airline stocks slumped after the federal government challenged the proposed merger of US Airways and American Airlines, a deal between two of the largest carriers. The government says the deal would result in "substantial harm to consumers" in higher fares and fees.
Major indexes started slightly higher, drifted lower at mid-morning, and was back up again in the early afternoon. Trading has been unusually light this week and last as many investors take vacation.
"The market is drifting and consolidating here, and we think this is likely (to continue) over the next week or so," said Jim Russell, a Regional Investment Director at US Bank.
A report on retail sales last month came in slightly weaker than investors expected. Sales increased 0.2 percent in July from June, the Commerce Department reported. The increase was slightly below the 0.3 percent that economists had forecast, according to data provider FactSet.
The Dow Jones industrial average was up 44 points, or 0.3 percent, at 15,463 as of 12:55 p.m. Eastern Daylight Time.
The Standard & Poor's 500 index was up three points, or 0.2 percent, at 1,693. The Nasdaq composite was up six points, or 0.2 percent, at 3,676.
Other indexes fell. The Dow Jones Transportation average dropped 43.86, or 0.7 percent, to 6,450, dragged down by the slump in airline stocks. Indexes measuring utilities and small-company stocks also fell.
The S&P has lost 1.2 percent since hitting an all-time high of 1,709 on Aug. 2. Disappointing second-quarter corporate earnings reports have prompted investors to send stock prices lower this month.
The index is still up 18 percent for the year on optimism that the housing market will recover and hiring will pick up.
In government bond trading, the yield on the 10-year Treasury note jumped to 2.71 percent from 2.62 percent Monday. The yield is used as a benchmark to set interest rates on many kinds of loans including home mortgages.
In commodities trading, the price of oil fell 25 cents, or 0.2 percent, to $105.88 a barrel. Gold dropped $13.60, or 1.03 percent, to $1,320 an ounce.
European markets rose broadly following news that industrial production rose in the region in June. A German survey of investor confidence also came in better than analysts had expected.
The dollar rose against the euro and the Japanese yen.
Among stocks making big moves:
- J.C. Penney fell 36 cents, or 2.7 percent, to $12.81. The struggling department store chain faces an uncertain future after activist investor William Ackman resigned from the company's board.
- Yum Brands, which owns the Taco Bell, Pizza Hut and KFC fast-food chains, slumped $2.5, or 3.3 percent, to $72.01 after reporting that its sales in China fell 13 percent in July.
- Eli Lilly and Co. rose $2.02, or 3.75 percent, to $55.56 after the company said its potential lung cancer treatment necitumumab met a key research goal by helping to increase survival time for patients in a late-stage study.
- PulteGroup fell 49 cents, or 3.1 percent, to $15.24, leading a broad decline in homebuilder stocks.
- US Airways fell $1.92, or 10.2 percent, to $16.90. Other airlines also fell. Delta Air Lines dropped $1.60, or 7.7 percent, to $19.44 and United Continental fell $2.05, or 6.2 percent, to $56.87.
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