Wall Street Searches for Direction

Stocks on Wall Street trade narrowly mixed as the White Houe hammers out a federal bailout of the Big Three automakers and as investors mull the latest retail and housing numbers.
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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.

Indeed,

existing

-home sales are getting a boost from sales of foreclosed homes, which have been accounting for as much as 30% to 40% of sales in some areas of the nation, according to the NAR report.

"We'll probably see modest declines in existing home sales through the end of the year," says Newport.

While the solidification of an automakers' bailout seemed imminent on Monday, according to those involved, the details remain unresolved. Under proposed legislation submitted by Congress to the White House Monday afternoon, the

Big Three automakers

--

Ford

(F) - Get Report

,

General Motors

(GM) - Get Report

and

Chrysler

-- would receive up to $15 billion in emergency aid.

Under the plan, the federal government would tap an existing loan program meant to help the automakers build fuel-efficient vehicles. The legislation would also permit the U.S. government to receive warrants for stock that equate to at least 20% of loans given to the automakers.

A federal official, dubbed the "

car czar

," would oversee a government-run retooling of the automakers. And the United Auto Workers (UAW) union might request an equity stake or board seat in one of the automakers in return for making contract concessions to help the automakers, according to a report in

The Wall Street Journal

.

Other data released Tuesday showed continued weakness in retail and chain store sales. The International Council of Shopping Centers weekly chains stores data showed a 0.8% drop in sales for the week of Dec. 6 compared to the week prior. The Johnson Redbook Retail Sales Index showed an 0.8% decline for the same week compared to the month prior.

Meanwhile, stocks in the shipping sector were struggling after

FedEx

(FDX) - Get Report

cut its 2009 earnings and expense guidance.

In

analyst action

, Barclays cut estimates and its price target for FedEx to reflect the company's earnings warning. Meanwhile, JPMorgan downgraded fellow package delivery company

UPS

(UPS) - Get Report

to neutral from overweight.

Also, trucking firm

Con-Way

(CNW)

cut its 2008 profit guidance late Monday by roughly 15%, as it wrestles with reduced demand for shipping goods. The company also said it cut about 8% of its workforce, or 1,450 jobs, last week.

Shares of FedEx, UPS and Con-Way were trading with losses.

In company news, Japanese electronics company

Sony

(SNE) - Get Report

said its cutting 8,000 jobs and will close 10,000 factories in hopes of saving roughly $1.1 billion annually.

Auto parts retailer

AutoZone

(AZO) - Get Report

said its fiscal first-quarter profit also fell slightly under higher expenses and weak U.S. same-store sales -- due to disruption caused by Hurricanes Gustav and Ike, and of course, the economy.

In commodities, crude oil was recently down 51 cents to $43.20 a barrel, after rising slightly earlier in the day. Gold was gaining $4.30 to $773.60 an ounce.

Longer-dated U.S. Treasury securities were mixed. The 10-year was down 1/32 to yield 2.73%, and the 30-year was adding 12/32, yielding 3.13%. The dollar was stronger against the euro, pound and the yen.

Overseas, European exchanges such as the FTSE in London and the DAX in Frankfurt were trading higher -- up 2% and 1.3%, respectively. In Asia, Japan's Nikkei ended higher, while Hong Kong's Hang Seng ended with losses.

According to Japanese government officials, the country fell deeper into a recession in the third quarter than it originally surmised, impaired by the economic downturn.