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Dow Keeps Rally Going

The index hits a record high but ends well below its intraday best. The Nasdaq sinks.

Updated from 4:17 p.m. EDT

For the

Dow Jones Industrial Average

, it was another new record, but it could have been so much more.

After a strong morning for Wall Street, buying momentum faded Tuesday afternoon and stocks in New York finished mixed. The Dow tacked on 37.06 points, or 0.28%, to 13,383.84. Earlier, it touched a record intraday level of 13,481.60 before pulling back.

Sixteen of the Dow's 30 components finished ahead. Leading the way was a 4.4% rise in shares of

General Motors

(GM) - Get General Motors Company (GM) Report

.

Meanwhile, the

S&P 500

lost 1.96 points, or 0.13%, to 1501.19, and the tech-heavy

Nasdaq

gave back 21.15 points, or 0.83%, at 2525.29, pressured by a decline in chip stocks. Both indices had been positive until the market weakened.

The Philadelphia Stock Exchange Semiconductor Sector Index lost 1.2%, with

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

falling 3.1% in front of its fiscal second-quarter earnings report.

Breadth was negative for a second straight session. About 3.09 billion shares changed hands on the

New York Stock Exchange

, where decliners beat advancers by a 3-to-2 margin. Volume on the Nasdaq reached 2.26 billion shares, and losers outpaced winners 7 to 3.

"We've been in a large-cap rally, so the blue chips are responding better, while the Nasdaq has been the sick one," said Peter Cardillo, chief market economist with Avalon Partners. "I suspect there could be some real negative news that will spread the weakness in the Nasdaq to the Dow and the S&P 500. We need a new, exciting catalyst, or else we're going to run into seasonal factors."

Art Hogan, chief market analyst with Jefferies, said investors are struggling as they weigh soft earnings and higher oil prices against the most recent inflation data.

"Traders have had to deal with the push and pull between arguably poor earnings and positive economic data today," said Hogan. "We're focusing back on macro issues rather than corporate news. Now that we're out of earnings season, we are shifting our focus to other things we ignored, such as the rise in crude to above the $63-a-barrel level."

The June crude contract finished higher by 71 cents at $63.17 a barrel.

During the first half of the session, stocks got a boost from a government report that said consumer-level inflation was benign last month. The Labor Department's consumer price index was up 0.4%, slightly below expectations, while the core index, which excludes food and energy prices, rose 0.2% and was in line with estimates.

On the positive side, the closely monitored core inflation figure is now up 2.3% over the past 12 months, down 0.2 percentage points from March's level.

The data follow last week's producer price index, which rose a greater-than-expected 0.7% in April. The core PPI was unchanged, compared with expectations of a 0.2% increase. The PPI report measures inflation at the wholesale level.

Ian Shepherdson, chief economist with High Frequency Economics, noted that annual core consumer prices have dropped from a 2.9% peak in September. "The headline is at 2.6%

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year over year and will rise further thanks to energy prices, but overall,

this is good news," he said.

The CPI is considered the more important of the two when it comes to influencing

Federal Reserve

decisions on interest rates, but both are factored into the central bank's planning.

Elsewhere on the economic docket, the New York Fed said its Empire State Manufacturing Index rose to a reading of 8.0 in May, compared with 3.8 in April. However, the index was expected to jump to 9.0.

Treasury prices lost ground following the figures. The 10-year note was down 4/32, yielding 4.71%, and the 30-year bond was lower by 8/32 in price to yield 4.88%. The dollar fell against the world's major currencies.

Before the session got underway, two Dow components were in the headlines, but neither did much to inspire the bull camp.

Wal-Mart

(WMT) - Get Walmart Inc. Report

said its fiscal first-quarter profits were in line with analysts' estimates. Second-quarter earnings, the world's biggest retailer said, should be 75 cents to 79 cents a share. The consensus forecast is 79 cents. Wal-Mart ended down 22 cents, or 0.5%, at $47.62.

Home Depot

(HD) - Get Home Depot, Inc. (HD) Report

, the largest seller of home-improvement goods, was even less impressive, missing expectations by a sizable margin and saying its full-year earnings would likely be at the low end of its previous guidance. Home Depot lost 71 cents, or 1.8%, to close at $38.30.

The weak earnings reports sank the S&P Retail Index, which ended down 0.8%. Meanwhile, subsector winners included the Philadelphia Utility Sector Index and the Dow Jones Transportation Average, which both gained 0.2%.

Merger activity remained in the headlines, with

Reuters

(RTRSY)

approving a planned acquisition by

Thomson

(TOC)

in a deal worth $17.2 billion. Reuters added $2.72, or 3.8%, to close at $74.34. After opening lower, Thomson managed to gain 16 cents, or 0.4%, to $42.16.

The takeover is the latest in a recent string of deals, the most recent one occurring earlier this week when Germany's

DaimlerChrysler

(DCX)

said it would sell an 80% stake in its Chrysler Group unit to private-equity firm Cerberus Capital for $7.4 billion.

Separately, DaimlerChrysler said it earned $2.64 billion, or $2.53 a share, for the quarter ended March 31, up from $1.05 billion, or $1.03 a share, a year earlier. Revenue fell to $47.3 billion from $50.3 billion last year. The shares finished higher by 68 cents, or 0.8%, at $84.80.

Away from stocks, commodities advanced. In addition to the gain in crude, gasoline tacked on a fraction of a penny to $2.31 a gallon. Gold added $4.40 to close at $674.50 an ounce, and silver futures were up 8 cents at $13.31.

Overseas, markets were mixed. Tokyo's Nikkei lost 0.9% to 17,513, and Hong Kong's Hang Seng shed 0.5% to 20,868. London's FTSE was higher by 0.1% at 6558, and Frankfurt's DAX was up 0.6% at 7505.