Wall Street Searches for Direction

Updated from 11:02 a.m. EST

Stocks in New York were lately trading mixed as investors digested the latest housing and retail data and waited to see if the prospective bailout for U.S. automakers would materialize.

The Dow Jones Industrial Average was down 111 points at 8822, and the S&P 500 was slumping 3 points at 906. Despite a recent swath of semiconductor profit warnings, the heavily tech-weighted Nasdaq was gaining 10 points at 1582.

"The market has already discounted a lot of negative news, so what I think we're seeing is some of the money on the sidelines being put to work," says Peter Cardillo, chief market economist at Avalon Partners, who thinks were in the midst of a rally set to last through the end of the year.

One positive economic figure to emerge today: The National Association of Realtors reported that pending home sales dropped about 0.7% in October, from September. That's far less severe a decline than the consensus expectation of a 3% drop.

"It was a little bit of a surprise to see the numbers come in a little better," says Cardillo. "If the housing numbers should begin to stabilize, that would be the key for economic recovery -- and for the market to move even higher later next year."

Patrick Newport, a housing economist at Global Insight Economics, said, "I thought the number would drop a lot because of high credit conditions everywhere." The better-than-expected results indicate that the mortgage market is still functioning, he says, people with good credit and a steady job can still get loans, and affordability is improving. Newport also pointed out that high sales of distressed homes in troubled regions, including California, Nevada and Arizona, are driving the overall figures higher.