Stocks Get Slugged Late

The big indexes turn red after a mostly positive session.
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Updated from 3:59 p.m. EDT

Stocks lost steam and finished in the red Tuesday, as bargain hunters were spooked by a spike in oil and another rise in commodities.

The

Nasdaq Composite

, which had been up by as many as 27 points earlier, fell 14.09 points, or 0.65%, to 2158.76. The

Dow Jones Industrial Average

lost 26.98 points, or 0.24%, at 11,098.35, while the

S&P 500

gave up 5.5 points, or 0.44%, to 1256.57.

"After the bargain hunting today, we saw the skittish nature of investors," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "This shows we're not out of the woods yet. Not all that much has changed as the market is still digesting higher energy prices, a possible slowdown in the economy and possible future rate hikes."

The Philadelphia Semiconductor Sector index swung from a 1.4% gain at the start of trading to a 1.6% loss for the day, dragging the Nasdaq down with it. Other sectors finishing lower included the Philadelphia Utility Sector index, down 1.5%, and the Dow Jones Transportation Average, which fell 0.8%.

Dow components posting losses of 1.1% or more included

McDonald's

(MCD) - Get Report

,

Home Depot

(HD) - Get Report

,

JPMorgan Chase

(JPM) - Get Report

and

Honeywell

(HON) - Get Report

.

"The fact that the rally failed today showed the lack of conviction we should have normally in upward momentum," said Edgar Peters, chief investment officer with Pan Agora. "Traders are waiting for economic numbers later this week before they will make a stand. There's a lot of uneasiness ahead of these numbers."

Marc Pado, U.S. market strategist with Cantor Fitzgerald, said that "the damage that has been done will likely require an attempt at a base before being able to sustain any kind of a rally."

About 1.91 billion shares changed hands on the

New York Stock Exchange

, with decliners outpacing advancers by a 9-to-7 margin. Volume on the Nasdaq was 2.17 billion shares, with decliners also beating advancers 9 to 7.

The 10-year Treasury note fell 9/32 in price to yield 5.06%, while the dollar fell against the yen and rose against the euro.

Crude prices surged higher, adding $1.80 to close at $71.76 a barrel, while gold rose $16 to $673.70 and copper added 42 cents to $3.88 a pound. While commodity markets ended firmer, selling persisted for a second session in related shares like

Alcoa

(AA) - Get Report

and

DuPont

(DD) - Get Report

.

For Monday's session, the Dow lost 19 points, or 0.2%, to 11,125, while the S&P lost 5 points, or 0.4%, to 1262. Both had rallied to positive territory late in the session before settling lower. The Nasdaq fell for the ninth time in 10 sessions, shedding another 21 points, or 1%, to 2173.

"We came down to key trading points on Monday," said Pado. "The Dow had fallen to within a point of the April intra-day low. The S&P 500 dipped to within a point of the February low. Once these support levels showed signs of holding, the bargain-hunting began. This has given people a point to jump in and get a trading position. The risks are still greater than the rewards at this level."

Overseas markets rebounded Tuesday. In Europe, London's FTSE 100 rose 2.6% to 5678 while Germany's Xetra DAX gained 2.4% to 5678. In Asia, Japan's Nikkei fell 1.6% to 15,599, while Hong Kong's Hang Seng rose 0.4% to 15,865. Meanwhile, emerging markets as measured by the Morgan Stanley Capital Emerging Markets Index were up about 3%, halting 10 straight sessions of declines.

In the U.S., investors continued to weigh the prospect of another

Federal Reserve

rate hike in June against the rising role of some U.S. assets as safe havens. On Monday, utilities and consumer-staple stocks rose along with a rally in the bond market, suggesting that money migrating out of riskier assets is finding a home in sectors thought to be recession resistant.

Several economic indicators due later this week could add to concerns the Fed must raise rates by another quarter point on June 29. Of particular concern is the revision to first-quarter gross domestic product growth that is due Thursday. Economists expect an earlier estimate of up 4.8% to be revised higher by a full percentage point.

To view Gregg Greenberg's video take on today's market, click here

.

Early Tuesday, Fed Chairman Ben Bernanke testified before a Senate committee on financial literacy, but did not make any remarks on further Fed moves regarding interest rates. Bernanke did blame a lapse of judgment on comments he made to

CNBC's

Maria Bartiromo earlier in the month regarding his congressional testimony. The chairman pledged future comments would be announced through regular channels.

Among earnings Tuesday,

Toll Brothers

(TOL) - Get Report

said its fiscal second-quarter profit rose 3% from a year ago to $175 million, or $1.06 a share, beating estimates by 3 cents. The homebuilder cut full-year guidance, however, pegging fiscal 2006 earnings at $4.69 to $5.16 a share, down from $4.77 to $5.26 a share. Still, the earnings beat had shares up 1.7% to $27.35.

Toll Brothers failed to keep the Philadelphia Housing Sector index above water, as the index lost 0.1%. Elsewhere, the Amex Gold Bugs index was surging 2.1% and the S&P Retail index was lower by 0.8%.

The scrum for Euronext, the European stock exchange operator, could come to a head as shareholders meet to weigh competing takeover proposals from the

NYSE Group

(NYX)

and the Deutsche Boerse. Euronext overnight criticized the latter's latest terms, saying they're not as lucrative as the $10.2 billion cash-and-stock offer made Monday by the New York Stock Exchange's parent. Shares of the NYSE Group were lower by $2.80, or 4.5%, to $60.05.

Fannie Mae

will pay $400 million to settle charges related to its accounting scandal of 2003. The payment will cover allegations the mortgage company's executives manipulated reported earnings to maximize their bonuses.

Among ratings moves, Ladenburg Thalmann upgraded

XM Satellite Radio

(XMSR)

to buy from hold, while RBC Capital raised its rating for

Mills Corp.

(MLS)

to sector perform from underperform.

Despite the upgrade, XM Satellite was losing 62 cents, or 3.8%, to $15.51. Mills was also lower, down 24 cents, or 0.8%, to $30.22.

Nokia

(NOK) - Get Report

was up 2.3% after UBS gave several reasons why the company is a good buy. The firm cited the company's competitive position, as well as an improving mobile device industry. Shares added 47 cents to $21.30.