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Nasdaq Closes Higher Again

The Dow slips, while the S&P ends just above the flatline.

Updated from 4:11 p.m. EDT

The

Nasdaq Composite

notched its eighth-straight winning session Tuesday, while blue-chips ended mixed, as minutes from the

Federal Reserve's

May 3 meeting showed policymakers wedded to their course of gradual rate tightening.

The

Dow Jones Industrial Average

fell 19.88 points, or 0.19%, to 10,503.68. The

S&P 500

added 0.21 point, or 0.02%, to 1194.07. The Nasdaq rose 4.97 points, or 0.24%, to 2061.62. The 10-year Treasury was up 6/32 in price to yield 4.03% after rallying 15/32 on Monday, while the dollar was lower against the yen and higher against the euro.

After a lot of paranoia in the lead-in, minutes from the Federal Open Market Committee's last meeting did little to move markets. While some Fed members expressed concern about signs of longer-term price pressures, they agreed that the current "measured" pace of rate-tightening was probably the best way to achieve prudent growth.

"Participants voiced concerns about recent price trends," the summary read. "They expected inflation to remain contained but also perceived that the risks to that inflation outlook now might be skewed somewhat to the upside. Along with energy prices, import and materials prices apparently had contributed to the recent uptick in inflation, and pressures on inflation stemming from these three sources were expected to lessen over coming quarters."

Still, the notes read: "On balance, measures of core inflation were thought likely to remain in check over the remainder of this year and next."

The Fed carried out its eighth consecutive quarter-point rate hike after the May 3 meeting, bringing fed funds to 3%.

Most of Tuesday's other news had a bullish bent, including Warren Buffett's purchase of a West Coast power company as well as unconfirmed reports that Iraqi insurgent leader Abu Musab al-Zarqawi was wounded.

"Nothing could hold the Nasdaq back," said Michael Sheldon, chief market strategist with Spencer Clarke. "The FOMC minutes included something for the hawks and something for the doves. The markets were due for a period of rest or consolidation. I wouldn't be surprised to see it last for a few days longer."

Trading volume on the

New York Stock Exchange

was 1.66 billion shares, with decliners matching advancers. Volume on the Nasdaq was 1.70 billion shares, with decliners outpacing advancers 8 to 7.

"After the gains we've scored, a day like this should be expected," said Larry Wachtel, senior market analyst with Wachovia Securities. "There isn't any terrible news around, but when you go up in a straight line, you have to pause. I hate to fall back on the excuse, but people are taking profits."

Oil prices moved higher, with the July crude contract rising 51 cents to $49.67 a barrel in Nymex trading.

Weaker sectors Tuesday included financials, brokers, autos and materials, while energy, tech, semiconductors and drugs showed relative strength.

Ian Shepardson, chief economist with High Frequency Economics, said the Fed minutes show policymakers remain unimpressed with this spring's soft patch.

"This view is consistent with the Fed's new view that core inflation has been boosted by the rise in energy prices," Shapardson said. "Overall, we don't see any great change here; the key message is that short-term softness will not stop rate hikes."

In addition, the National Association of Realtors reported a 4.5% increase in existing-home sales for April. Sales rose to a record seasonally adjusted 7.18 million from 6.89 million in March, much higher than the 6.90 million projection. Median sales prices rose 15.1% from last year to $206,000, the fastest year-over-year price gain in about 25 years.

Fitch Ratings cut both

General Motors

(GM) - Get Report

and its finance arm, GMAC, to BB+ Tuesday, its highest noninvestment grade, or junk, rating. The outlook remains negative. GM and GMAC previously had been rated BBB-, Fitch's lowest investment grade.

GM got knocked down further after Deutsche Bank said it expects both GM and

Ford

(F) - Get Report

to show another decline in U.S. market share in May. GM shares fell 90 cents, or 2.8%, to $31.69, while Ford lost 19 cents, or 1.9%, to $9.98.

"There's that nervousness to the junk bond status and its effect in the financial sector," said Barry Hyman, equity market strategist with Ehrenkrantz King Nussbaum. "A few weeks ago when the original downgrade came and hedge fund concerns arose, we saw potential leverage to the system hurting financials. I'd assume today's action is the same."

Brokers were in fact lower.

Goldman Sachs

(GS) - Get Report

lost 1.1%,

Charles Schwab

(SCH)

was off 1.3%,

Jefferies

(JEF) - Get Report

was lower by 1.9%, and

Merrill Lynch

(MER)

fell 1.3%.

Tech shares were pressured earlier by cautious comments from cell-phone operator

Vodafone

(VOD) - Get Report

, which trimmed the low end of its fiscal 2006 revenue growth estimate in London on Tuesday. Vodafone was down $1.53, or 5.7%, to close at $25.34.

Berkshire Hathaway

TST Recommends

(BRK.A) - Get Report

announced a deal Tuesday to acquire western utility PacifiCorp, which sells power in Oregon, Wyoming, Washington, California, Utah and Idaho. The purchase price comprises $5.1 billion in cash and $4.3 billion in debt instruments.

Two drug stocks moved in opposite directions after

Genentech

(DNA)

said its Lucentis treatment for the eye condition macular degeneration helped maintain or improve eyesight in 95% of patients in a trial. The data are a blow to

Eyetech

(EYET)

, which received marketing clearance for a similar product in December.

Eyetech fell $11.02, or 46%, to $12.95. Genentech added $2, or 2.6%, to $78.60.

Defense contractor

Raytheon

(RTN) - Get Report

received a $3 billion Pentagon contract Tuesday under which it will produce radar and other electronics for a new class of Navy destroyer. The pact is a follow-on contract to previously awarded business that will take Raytheon through 2009 on the project. The stock was higher by 12 cents, or 0.3%, to close at $39.17.

JDS Uniphase

(JDSU)

was upgraded to hold from sell at Smith Barney Tuesday after announcing the $760 million acquisition of test and measurement shop Acterna last night. Smith Barney raised its price target on the widely held shares to $1.65, citing increased scale in various telecom infrastructure markets. JDS Uniphase added 9 cents, or 5.8%, to $1.64.

Guidant

(GDT)

reportedly spent three years sitting on information that some of its defibrillators had a flaw that could cause them to malfunction. The company told

The New York Times

that after fixing the manufacturing process, it decided that the rate of malfunction was so low that a broad replacement campaign posed a greater health risk. Guidant dipped 48 cents, or 0.6%, to $73.75.

Shares of

Nanogen

(NGEN)

rose 6.7% after the company said it has received two patents, both relating to molecular diagnostics. The addition of the two patents brings the company's U.S. patent portfolio to 128. Shares were up 13 cents to $3.85.

Target

(TGT) - Get Report

said after the bell Monday that May same-store sales were expected near the high end of its previous forecast range of a 3% to 5% increase. Target expects to report actual May same-store sales on June 2. Shares were higher by 71 cents, or 1.4%, to close at $52.85.

In earnings news,

Dillard's

(DDS) - Get Report

was lower after the retailer posted a first-quarter profit of $38 million, or 46 cents a share, compared with $53.8 million, or 64 cents a share, a year ago. Earnings include a 4-cent-a-share charge due to store closings. Quarterly sales were down 3% to $1.8 billion. The Thomson First Call consensus called for EPS of 53 cents on revenue of $1.9 billion. Dillard's lost $2.11, or 8.3%, to $23.35.

Shares of

TiVo

(TIVO) - Get Report

were 17.9% higher after brokerage First Albany started coverage of the company with a strong buy rating. First Albany believes the company can be profitable at will once it abandons its burdening hardware strategy. The brokerage also assigned TiVo a $16 stock price target. The stock was up $1 to $6.60.

Wachovia upgraded

Dollar General

(DG) - Get Report

to outperform from market perform, citing strong same-store sales. The brokerage also cut

Dollar Tree

(DLTR) - Get Report

to market perform from outperform, believing customers are negatively impacted by higher energy costs and a lackluster job market. Dollar General rose 5 cents, or 0.2%, to $22.28, while Dollar Tree dipped 19 cents, or 0.7%, to $24.99.

Napster

(NAPS)

was up after Piper Jaffray reiterated its stock rating of outperform, saying that concerns over competition from

Yahoo!

(YHOO)

have created attractive valuation levels for the stock. Napster rose 28 cents, or 6.9%, to $4.35.

Overseas markets were mostly lower, with London's FTSE 100 down 0.1% to 4982 and Germany's Xetra DAX losing 0.2% to 4396. In Asia, Japan's Nikkei fell 0.2% overnight to 11,134, while Hong Kong's Hang Seng added 0.2% to 13,719.

To view Aaron Task's video take on today's market, click here

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