Stocks Close Slightly Down

A 10-year note auction yields more than some traders had expected, and the Fed's beige book paints a mixed picture. Alix Steel discusses the day in The Real Story video above.
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Updated from 4:17 p.m. EDT

Stocks in New York pared losses into the close Wednesday, recovering after a somewhat disappointing Treasury auction and the

Federal Reserve's

regional look at the economy after oil futures closed above $71 a barrel.

The

Dow Jones Industrial Average

gave up 24.04 points, or 0.3%, to 8739.02, while the

S&P 500

was off by 3.28 points, or 0.4%, to 939.15. The

Nasdaq

fell 7.05 points, or 0.4%, to 1853.08.

Alcoa

(AA) - Get Report

was the best performer on the Dow, gaining 3.1%, while

Caterpillar

(CAT) - Get Report

was the worst, losing 1.6%.

Losses accelerated as investors showed some disappointment in the Treasury's $19 billion auction of 10-year notes, the second leg of a planned $65 billion in sales of notes and bonds that has Wall Street's attention this week. The high yield was 3.99%, more than some traders had expected and the most the government has paid since August.

Longer-dated Treasury yields were rising. The 10-year, down 21/32, was yielding 3.94%, while the 30-year, which fell 1-18/32, was yielding 4.75%.

Shortly after the conclusion of the auction, the Federal Reserve released its beige book,

a report

on 12 of its district banks. Economic conditions remained weak or further deteriorated during the period from mid-April through May, according to the report.

"However, five of the Districts noted that the downward trend is showing signs of moderating," it said. "Further, contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year."

The major indices closed mixed prior to Wednesday. If it's any evidence of the indecision, the Dow reversed direction across the flat line 81 times Tuesday. The Dow has reached positive territory for the year during the last four sessions, but has yet to close there.

"There's a good amount of profit-taking on light news," says Anu Sharma, managing director of the market intelligence desk at Nasdaq OMX. At midday, the Nasdaq was on pace to do 30% to 40% less than average volume for the day.

"No one is really making any moves, and even if we get a little good news coming into the marketplace, we're going to see some profit-taking," says Sharma.

Moreover, the S&P and Dow are right near their 200-day moving averages, and that's creating some psychological resistance, says Charles Rotblut, senior market analyst at Zacks Investment Research.

"When you look at the light volume, the 200-day moving average, and the size of the rallies in some of these stocks, it's given some people caution, and some people are afraid to buy in this market," says Rotblut. At the same time, "every time we suggest the economy is getting better, saying that the worst-case scenario hasn't occurred, it could be an argument to buy."

One breakout area was commodities, in particular crude oil, which rose $1.32, to settle at $71.33 a barrel. The Department of Energy reported an inventory drawdown of 4.38 million barrels. Earlier in the week, the Energy Information Administration forecast increased oil demand for 2009, and the American Petroleum Institute said crude oil supplies fell 5.96 million barrels last week, helping to fuel the rise beyond $70 a barrel.

Inventory reductions "give further justification to some of the bullish activity we've seen," says Phil Flynn, an analyst at Alaron Trading. "Obviously the major factors have been the dollar and the bigger economic picture, but now we've got some actual numbers justifying what we've seen, indicating a more bullish outlook."

Among integrated oil stocks,

Chesapeake Energy

(CHK) - Get Report

rose 4.6%, and

PetroChina

(PTR) - Get Report

added 2.2%.

Tech stocks were lower, throughout the day but pared losses by the close.

Apple

(AAPL) - Get Report

was still down by 1.7%, however.

The Department of Commerce reported the trade deficit was just slightly greater than expected in April, at $29.16 billion, compared to a revised $28.53 billion in March. Exports declined 2.3% to the lowest level since July 2006, while imports dipped 1.4% to their lowest level since September 2004, despite a 2.1% uptick in imports of petroleum driven by the rebound in crude oil prices.

In corporate news,

Home Depot

(HD) - Get Report

lifted its fiscal-year

earnings outlook

, saying it now expects earnings per share from continuing operations to be flat to down 7% from a year earlier, while adjusted earnings are seen falling 20% to 26%. The previous expectation was for the lower end of those ranges. Shares edged up 0.2%.

Also, the Supreme Court

cleared the way

for

Chrysler's

sale to

Fiat

, turning down an appeal by opponents that included consumer groups and three Indiana pension plans. The Supreme Court issued a stay earlier in the week effectively halting the asset sale before ultimately allowing it through.

The dollar was recently weaker vs. the yen, pound and euro. Gold was unchanged at $954.70 an ounce.

Stocks overseas were widely higher. In Europe Frankfurt's Dax and London's FTSE 100 were up 0.7% and 1.1%, respectively. In Asia, Hong Kong's Hang Seng and Japan's Nikkei gained 4% and 2.1%, respectively.