Dow Turns in Worst August Since 2001

NEW YORK (TheStreet) -- Stocks finished Tuesday hugging the flatline as the release of the minutes from the most recent meeting of the Federal Open Market Committee tripped up a light rally on the latest batch of macroeconomic data.

The session put a wrap on a beastly August performance for the Dow Jones Industrial Average, which fell 4.3% during the month, its worst showing since 2001.

Trading started out sluggish following weakness in Asia overnight with global slowdown fears prompting Japan's Nikkei index to finish at its worst level in 16 months.

But after falling below the 10,000 level early on, the Dow rallied more than 100 points off its session low, lifted by the spate of mostly positive macroeconomic data, including a better-than-expected read on consumer confidence.

After the release of the FOMC minutes, however, the blue-chip index wavered, even falling into negative territory again late in the session. When the closing bell sounded, the Dow was ahead by 5 points, or 0.1%, at 10,015. The S&P 500 eked ahead by a fraction of a point, or 0.04%, at 1,049, while the Nasdaq shed 6 points, or 0.3%, at 2,114.

Just prior to the release of the FOMC minutes -- which outlined the internal debate about the details of the Fed's reinvestment program and its future direction -- the Dow was up about 35 points.

Among Tuesday's datapoints was Standard & Poor's/Case-Shiller 20-city composite home price index for June, which showed prices rose 4.2% since last year. Wall Street was looking for a year-over-year increase of 3.1%, according to Briefing.com. In May, home prices tracked up 4.6% from a year earlier.

After the opening bell, the Chicago Purchasing Managers Index showed a slowdown in manufacturing activity in the Midwest. The August index, which was projected to register a 57, came in at 56.7. That tally is down from a 62.3 reading in July.

But the biggest upside surprise in the data stream was the Conference Board saying its August reading on consumer confidence reached 53.5, well better than projections calling for that measure to rise to 50.5. Stocks traded comfortably in the green after the report's release.

The Federal Reserve released minutes from the most recent meeting of its policy-making arm. The August confab of the FOMC ended with policymakers leaving the key fed funds rate unchanged at near zero. But with economic indicators waning on several fronts, the group also said it would reinvest proceeds from agency debt and mortgage-backed securities into long-term Treasuries.

The minutes showed members had varying opinions about the effects of the reinvestment program. Most of the members also agreed that while reinvesting in Treasuries was the right course, they also left open the possibility of reinvesting in MBS if conditions changed.

According to Marc Pado, U.S. market strategist at Cantor Fitzgerald, the growing sense of differing opinions among members about how to stabilize the economy, after having stood unified on rate cuts during the depths of the economic crisis, may be what put pressure on stocks late in today.

"It's kind of a difficult position for the Fed in that Bernanke has always encouraged everyone to give their opinion. Be careful what you wish for," Pado said, adding that the overall tenor wasn't necessarily negative. "It's just the fact that there's some disagreement in the ranks. As you start getting closer to the 50/50 split in the discussions, than it seems more and more their introducing uncertainty because we don't know what the monetary policy is going to be, which way the Fed is going to lean."

Elsewhere, the Federal Deposit Insurance Corp. said banks earned $21.6 billion during the second quarter, the Associated Press said, though another 54 banks were added to the FDIC's "problem" list.

Shares for JPMorgan Chase(JPM), AT&T(T) and DuPont(DD) rose and led gainers on the Dow. But Cisco(CSCO), Intel(INTC) and Boeing(BA) were the main drags on the blue-chip average.

Tech stocks, in particular, were coming under pressure Tuesday. Several media reports said the sector was at least partly weighed down by an industry report projecting less robust PC sales than previously forecast. According to Dow Jones, research firm Gartner said estimated 2010 shipments would hit 367.8 million units on a less brisk latter half of the year, though the same group had called for shipments at 376.6 million back in May.

According to a survey of analysts and investors, it's believed Dell(DELL) will drop out of the bidding war to acquire 3PAR(PAR), Reuters said. Hewlett-Packard(HPQ) ratcheted up its bid to $30 a share last week, giving Dell until Wednesday to reply. Dell lost 2.1% at $11.77, while 3PAR went ahead by 32 cents to $32.14. HP slipped 0.2% to $38.47.

HSBC said in a statement that its $3.56 billion sale of its auto finance units in the U.S. to Banco Santander(STD) was completed.

Saks (SKS) shares were surging higher by 20.2% after the U.K.'s Daily Mail said a private-equity buyout could be in the works for the retailer. Shares traded up by $1.30 at $7.90.

Though the earnings slate is light Tuesday, a few retailers reported in the morning. Dollar General(DG) lifted its full-year outlook and topped bottomed line estimates, reporting earnings of 42 cents a share. DSW(DSW), the shoe retailer, also topped forecasts, saying its earnings improved to 52 cents a share in the second quarter from 17 cents a share at the same time last year, helped by widening gross margins. Dollar General slid 12 cents at $27.26, while DSW declined 11 cents at $23.68.

Deere(DE) said it was selling off its wind segment to a unit of Exelon(EXC) for $900 million. Deere shares gained 0.4% to $63.24.

Shares of Monsanto(MON) fell nearly 6% at $52.64 after the seed seller underwhelmed Wall Street, saying its annual earnings will likely hit the low end of prior projections at a range of $2.40 to $2.45 a share.