U.S. Stocks Pare Gains

Stocks in New York eased off their morning highs but hold to gains as investors wade through more earnings and await the Federal Reserve's two-day meeting to discuss interest rates.
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Updated from 10:53 a.m. EDT

Stocks in New York Tuesday have eased off their morning highs following an upside open Tuesday, as traders geared up for a

Federal Reserve

meeting and took in a series of corporate earnings reports.

The

Dow Jones Industrial Average

was up 164 points to 8340, and the

S&P 500

added 14 points to 863. The

Nasdaq

jumped 15 points to 1520.

As Tuesday began, the Fed was set to begin deliberations on its interest-rate policy. Many investors expect the Federal Open Market Committee to reduce its target interest rate 50 basis points to 1%. Such a move would signal interest in providing the markets with capital to alleviate the ongoing credit crisis.

"Often times you see the market move, and you try to back into reasons the market moves," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. Sparks said he's inclined to believe that today's rally is a bounce within a downtrend and is not based on cheap valuations or speculation about a Fed rate cut. "Unless

the rally sustains itself for a significant period ... I don't see it as being meaningful."

"The hope is we've washed out," said Chip Hanlon, president at Delta Global Advisors. "The reason the market can't rally for any lasting period is investors can't trust that that's true." He said the credit crisis could reemerge in a collapse of the commercial real estate market that historically has followed declines in residential housing.

On the other hand, said Hanlon, stocks are dramatically oversold at these levels. "They could rally at any time and the rally could be really significant. ... However, I think it's fair that investors don't trust any rally," he said. "We're not done yet."

Meanwhile, the

Treasury Department

is facing difficulties implementing its $700 billion program to purchase troubled assets from banks, according to a report in

The Wall Street Journal

. The report indicated that the plan faces delays in hiring managers for the assets.

As for

earnings

, BP, Europe's second-largest oil company, reported third-quarter earnings that increased 83% on high oil and natural gas prices.

Occidental Petroleum

(OXY) - Get Report

, another oil-patch denizen, also reported a rise in earnings.

German software firm

SAP

(SAP) - Get Report

said its third-quarter profit slipped 5% and said it would not issue a revenue forecast for the remainder of this year.

U.S. Steel

(X) - Get Report

also announced an encouraging third quarter, saying profit more than tripled. However, the company offered softer guidance for the fourth quarter.

Whirlpool

(WHR) - Get Report

reported a 7% decline in third-quarter earnings and said it plans to slash 5,000 jobs.

In other company news, aircraft maker

Boeing

(BA) - Get Report

came to a tentative agreement with the International Association of Machinists and Aerospace Workers union. The union had been on strike since Sept. 6.

As for automakers, the

Journal

reported that

General Motors

(GM) - Get Report

may secure a $5 billion government loan -- part of $25 billion in funding recently authorized by Congress -- to finance a purchase of fellow troubled automaker

Chrysler

.

Elsewhere on the merger front,

Huntsman

(HUN) - Get Report

and

Hexion Specialty Chemicals

faced a setback in their planned deal. The companies announced that they were willing to complete a merger, but have received notice from counsel to affiliates of

Credit Suisse

(CS) - Get Report

and

Deutsche Bank

(DB) - Get Report

. The banks said they do not want to fund the deal today.

Discouraging economic data accompanied stocks' pullback from their highs. The Conference Board's read of October consumer confidence registered at an all-time low of 38, down from 61.4 in September and well below economists' predictions of 52.

In housing, the S&P Case-Shiller 20-city home price index declined 17% year over year in August. The 10-city index dropped 18%. The declines in both indices are the largest on record.

As for commodities, crude oil was shedding 8 cents to $63.14 a barrel. Gold was declining $6 to $736.90 an ounce.

Longer-dated U.S. Treasury securities were declining in price. The 10-year was down 22/32 to yield 3.77%, and the 30-year was losing 1-6/32, yielding 4.11%. The Treasury announced a sale of $34 billion in two-year Treasury bills to raise money to continue to bolster the banking system. It plans to raise another $24 billion on Oct. 30.

Credit markets were loosening, as three-month dollar Libor, a measure of the rate banks charge one another for large loans, declined to 3.47% from 3.51% on Monday. The overnight Libor rate declined 2 basis points to 1.24%.

The dollar was rallying vs. its major foreign competitors.

Overseas, European exchanges, including London's FTSE and Frankfurt's DAX, were mostly trading higher.

Asian stocks

had a mixed session, as the Nikkei in Japan and the Hang Seng in Hong Kong closed with gains.

(

Photo gallery: Trading Faces

)