Publish date:

Stocks Fight Their Way Back to Mixed Close

The U.S. market ends a choppy session in the green following the release of fresh home-sales and consumer data as well as the latest FOMC minutes. Check out The Real Story above for more.

Updated from 4:12 p.m. EDT

Stocks edged higher in the final hour of trading Tuesday to close roughly where they opened the choppy trading session -- narrowly mixed. Traders digested home-sales data that were as bad as expected, improved consumer confidence reports and hawkish notes from an August

Fed

meeting.

The

Dow Jones Industrial Average

gained 26.62 points, or 0.2%, at 11,412.87, and the

S&P 500

added 4.67 points, or 0.4%, to 1,271.51. The

Nasdaq

shed 3.62 points, or 0.2%, at 2,361.97.

Recent angst over U.S. financial institutions persisted Tuesday.

The Wall Street Journal

reported that federal regulators have sent "memorandums of understanding," documents that can force banks to raise capital or reduce exposure to high-risk assets, to as many as six banks, including

National City

(NCC)

,

Imperial Capital

(IMP)

,

First State

undefined

and

BankUnited Financial

(BKUNA)

.

The memorandums represent efforts by the Federal Reserve and the Office of the Comptroller of the Currency to head off failures, the report said. Nine banks have failed this year, and five of those have gone under since mid-July. The most recent casualty occurred last week, when a Kansas bank was shut down.

Further illustrating unease over U.S. banks was the release of the Federal Deposit Insurance Corp.'s second-quarter list of so-called problem banks. The number of banks on the list increased to 117 from 90 in the first quarter, and assets controlled by troubled banks increased to $77 billion from $26 billion.

IndyMac

, which was seized by regulators on July 11, accounted for $32 billion of those assets.

The FDIC said that it foresaw the addition of more banks to its list as credit conditions continue to deteriorate.

In the technology space, PC maker

Hewlett-Packard

(HPQ) - Get HP Inc. (HPQ) Report

has completed its purchase of

Electronic Data Systems

TheStreet Recommends

. H-P had announced the $13.3 billion deal in May. H-P shares rose fractionally to $46.86.

Ahead of its merger with

Northwest Airlines

(NWA)

,

Delta

(DAL) - Get Delta Air Lines, Inc. Report

said it took out a $1 billion loan to increase its cash position as it finalizes the joining of the two companies. Northwest shares tumbled 4.6% to $9.55, and Delta dropped 5.1% to $7.94.

In earnings news, mining company

Rio Tinto

(RTP) - Get REINVENT TECHNOLOGY PARTNERS CLASS A Report

announced earnings for the first half of 2008 that increased from a year ago and beat analyst estimates. Shares edged up 0.7% to $382.15.

Specialty retailers

Chico's FAS

(CHS) - Get Chico's FAS, Inc. Report

and

American Eagle

(AEO) - Get American Eagle Outfitters, Inc. Report

reported quarterly results that declined year over year but came in ahead of expectations. Chico's rose 2.2% to $5.09, and American Eagle added 4% to $14.29. Meanwhile, discount-store operator

Big Lots

(BIG) - Get Big Lots, Inc. Report

posted rising profits and beat the Street's forecasts. Shares took a 7.1% hit to $30.72, however, after Big Lots issued a disappointing revenue forecast.

Smithfield Foods

(SFD)

swung to a first-quarter loss on rising commodity costs, and shares dropped 6.9% to $21.91.

As for economic data, the Conference Board's measure of August consumer confidence came in at 56.9, showing an improvement in sentiment from July's reading of 51.9 and a better look than economists had been expecting.

Because consumer confidence is highly correlated with gasoline prices, the decline in gasoline prices in recent weeks has contributed to the bolstered consumer, wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics, in an email. He said the August bump in confidence pales in comparison with the substantial decline of the last year, however.

The June Standard & Poor's/Case-Shiller home-price index fell 15.4% from a year ago. The index declined 0.5% from May to June.

Meanwhile, the Census Bureau said that new-home sales in July rose to an annual rate of 515,000 units, an increase of 2.4% over June's revised figure of 503,000. The initial June reading had homes selling at an annual pace of 530,000 units. "We still can't say with any confidence that sales have hit bottom, though the rate of decline has certainly slowed," wrote Shepherdson. He said that a decline in inventories is an encouraging sign.

Chris Johnson, chief executive officer of Johnson Research Group, said that analysts were expecting a similar decline in home sales. He said that in the short term, the result doesn't pose much selling pressure for the market, but as lenders continue to reduce credit lines to consumers and face exposure to assets that are devaluing, risks to financial institutions increase. Meanwhile, homeowners will feel a pinch on the consumer side as their lines of credit dwindle, he said.

The Fed also released the minutes from its Aug. 5 policy meeting. At that gathering, the central bank elected to keep its target interest rate at 2%, which is where it's been since April. The minutes indicated that the Fed was concerned over the slowing global economy and saw continued downside risks to growth. According to the minutes, the Fed is looking to raise interest rates the next time it makes a change.

Chris Johnson said that the hawkish tone wasn't a surprise to investors, because the Fed and Chairman Ben Bernanke have been talking about shifting concern to inflation for a while now. He said that although the average investor may not see inflation as a large risk to investment dollars, inflation does pose a much more substantial risk on the consumer side.

In commodities, the price of crude oil rose $1.16 to settle at $116.27 a barrel. Gold was unchanged at $828.10 an ounce. The

United States Oil Fund

(USO) - Get United States Oil Fund LP Report

, an exchange-traded fund that tracks the commodity, gained 0.9% to $93.90.

In the fixed-income area, Treasuries were edging downward. The 10-year note was down 4/32 and yielding 3.8%. The 30-year was giving back 6/32 to yield 4.4%. The dollar was gaining against the euro, yen and pound.

Overseas markets were mixed, as the FTSE in London, the Nikkei in Japan and the Hang Seng in Hong Kong all trading lower. The Dax in Frankfurt was posting gains.