Recent sessions suggest the postwar rally is running out of momentum. But optimists could take solace that major averages ended at or near session highs Tuesday as traders sloughed off a warning from


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, and lingering concerns about

Monday's shake-up at

Freddie Mac



Early buying gave way to late-day selling, and some traders thought the downturn might accelerate into the close. But major averages avoided trading in arrears during the afternoon slide and rebounded smartly in the final 30 minutes of trading.

After trading as high as 9059.29 shortly after 10 a.m. EDT, the

Dow Jones Industrial Average

fell below 9000 late in the day, before rallying again to finish up 0.8% to 9054.89. Following similar patterns, the

S&P 500

ended up 0.9% to its intraday best of 984.84, while the

Nasdaq Composite

gained 1.5% to 1627.67, just below its apex.

For a second-straight session, trading volume declined -- with under 1.3 billion shares on the

Big Board

and 1.8 billion in over-the-counter trading, vs. more than 3 billion Friday and more than 2 billion for several sessions prior to that.

Meanwhile, advancers bested declining stocks and new 52-week highs bested new lows 329 to 3 in

New York Stock Exchange

action and 156 to 3 in Nasdaq trading.

To some, this recent volume retreat suggests speculative traders are being less aggressive, and the gains were relatively small in momentum sectors such as biotech, Internet, and semiconductors, which each rose more than 1%. Still, there were some big percentage moves among smaller biotech plays such as



, which rose 15% after receiving a grant from the federal government to work on a vaccine for AIDS.

Aastrom Biosciences


leapt 10% in heavy trading after announcing a deal to develop tissue regeneration treatment with the nonprofit Musculoskeletal Transplant Foundation.

On the flip side,



, which has soared in recent days, gave back 16.8% after announcing plans for a $15 million private placement of 1.5 million shares.

The S&P Homebuilding Index, meanwhile, rallied 2.7% after sliding sharply Monday on fears of a fallout in the mortgage/housing industry from Freddie Mac's shake-up. Some traders fear uncertainty will result in a higher cost of capital for Freddie and its government-sponsored counterpart

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Fannie Mae


. Higher costs for Fannie and Freddie, likely accompanied by stricter regulatory oversight, would curtail their ability to buy mortgages from banks, ultimately resulting in higher borrowing costs, thus crimping demand for housing. (Freddie rose 2.5% Tuesday while Fannie dipped 2%.)

Tuesday's rebound among homebuilders was aided by positive comments from Lehman Brothers and ahead of earnings from


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, due after the close.

Among other names in the news, Nokia fell 2.2% after voicing caution on handset sales, while

Micron Technology

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jumped 7% after upping its guidance.

Commodities Corner

Save for the late-day surge, the action in equities was fairly tame Tuesday, especially compared with developments in commodities.

Gold futures tumbled 2.7% to a four-week low of $352.90 amid some strength in the dollar vs. the euro and a sense the long side of the gold trade had become crowded. Friday's Commitment of Traders report from the U.S. Commodity Futures Trading Commission showed speculators with their largest net long position since February 1983,



Meanwhile, much of the day's focus was on energy, although not necessarily oil, even as crude futures rose 1% to $31.75 per barrel. Instead, the market stopped to look and listen at

Federal Reserve

Chairman Alan Greenspan's

testimony on natural gas. Natural gas futures rose 0.4% to $6.34 per million British thermal units Tuesday vs. $3.65 a year ago and as low as $2.55 in July 2000.

"We are not apt to return to earlier periods of relative abundance and low prices any time soon," Greenspan said, repeating concerns raised on May 21 when he spoke of natural gas shortages during his semiannual testimony before Congress.

On Tuesday, Greenspan expressed concern that sustained higher natural gas prices will curtail economic activity.

"The updrift and volatility of the spot price for gas have put significant segments of the North American gas-using industry in a weakened competitive position," the chairman testified. "The perceived tightening of long-term demand-supply balances is beginning to price some industrial demand out of the market."

Greenspan is afraid of a "delayed reaction" in the economy from higher natural gas prices, such as higher fertilizer prices, which may put upward pressure on agricultural products, according to Fadel Gheit, energy analyst at Fahnestock. "He's trying to get people's attention and bring up this issue which nobody in the administration is talking about."

Gheit largely agreed with Greenspan's main point, which is that there's an economic downside to environmental obstacles to finding and transporting natural gas. Still, the analyst wondered why Greenspan was delivering the message.

"This is the responsibility of the energy secretary, not Greenspan," Gheit said. Spencer Abraham "should have brought this up to Congress. I don't know what he's doing."

Other Greenspan watchers also expressed amusement at the chairman's latest pet project.

"Is he a one-man band?" quipped one economist and longtime Fed critic. "It's hilarious. They

Congress ask him about fiscal policy and taxes and now natural gas. He does it all, except he won't talk about the dollar and no one

on Capitol Hill asks him about monetary policy."

Notably, rising expectations for another rate cut from the Fed helped the price of the benchmark 10-year Treasury note rise 21/32 to 103 19/32 Tuesday, its yield falling to 3.20%, a new low for the cycle and the lowest since 1958. The yield on the two-year note fell to 1.11%, its lowest level since 1950, according to



In separate but apparently unrelated news, the federal deficit hit a record $291 billion in May, the Congressional Budget Office reported Tuesday. The nonpartisan agency raised its forecast for the fiscal 2003 deficit to $400 billion.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.