Stocks fluctuated in early trading Wednesday as good news on manufacturing helped offset a decline in commodities prices.
The market got support from a key economic indicator that signaled growth in the Midwest manufacturing industry for a third straight month. The Chicago Purchasing Managers Index rose to 60 in December from 56.1 in November. The report showed that production and new orders increased and employment improved.
But the market's gains were held back by a drop in energy and material stocks. A stronger dollar pulled on commodities prices, making the shares of companies that produce commodities less attractive.
Some investors have been buying the dollar in recent weeks on the belief that the economy is improving and the Federal Reserve will raise interest rates in the next year. That buying interest comes after a months-long slide in the greenback. Rock-bottom interest rates have encouraged investors this year to move out of cash and into riskier assets like stocks and commodities that have the potential to earn bigger returns.
While a rise in interest rates would be a sign that the economy is on the right track, it could hurt the stock market's advance. A stronger dollar makes commodities more expensive for foreign buyers and can hurt the profits of companies that do business overseas.
There were also plenty of reminders that corporate America is still hurting from the blows of the recession.
The government was preparing to extend another multibillion loan to GMAC Financial Services to further stabilize the auto financing company, according to a person familiar with the matter. GMAC, instrumental to the operations of automakers General Motors Co. and Chrysler Group LLC, has already received $12.5 billion in taxpayer money and is 35 percent owned by the federal government. The person, who spoke on condition of anonymity because discussions weren't complete, said the bailout would be in the range of about $3 billion.
Meanwhile, health insurer Aetna Inc. said it expects to take a fourth-quarter charge of up to $65 million to cover the costs of layoffs and consolidations.
The Dow Jones industrial average rose 2.65, or 0.03 percent, to 10,548.06. The Standard & Poor's 500 index fell 0.79, or 0.1 percent, to 1,125.40, while the Nasdaq composite index rose 0.80, or 0.03 percent, to 2,289.20.
The ICE Futures U.S. dollar index, which measures the dollar against other major currencies, rose 0.4 percent. Gold and other metals fell. Oil prices added 12 cents to $78.99 a barrel on the New York Mercantile Exchange.
Bond prices were steady ahead of an auction of seven-year notes, the last of the government's issuances this week. In total, the Treasury is auctioning off $118 billion of new debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unmoved at 3.80 percent. Interest rates on many consumer loans track the yield on the 10-year Treasury.
The pullback in stocks added to modest losses on Tuesday when the market ended a six-day winning streak as reports on home prices and consumer confidence failed to rally investors. While the reports showed improvement, they were largely in line with expectations and painted a picture of a slowly recovering economy.
After a 24.7 percent rise in the Standard & Poor's 500 index this year, many investors have closed their books and are making few moves ahead of the start of 2010. With fewer traders in the market, price swings can be exaggerated.
About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to a low 101.3 million shares.
In other trading, the Russell 2000 index of smaller companies fell 1.74, or 0.3 percent, to 631.44.