Stock Indexes Post Gains in Mixed Session

Stocks finished a lackluster session mixed Tuesday as many investors opted to keep to the sidelines after a disappointing report on retail sales and another increase in oil prices.

With Hurricane Ivan threatening oil rigs in the Gulf of Mexico, crude futures moved higher for a second straight day. Oil settled at $44.39 a barrel, up 52 cents, in New York trading.

Sluggish automotive sales resulted in a 0.3% drop in retail sales for August, worse than the 0.1% economists had expected. However, when auto sales were removed from the equation, sales were actually up slightly for the month -- although not enough to completely assuage Wall Street’s concerns or encourage most investors to make new buys.

“To make a commitment right now, it’s like being in a life raft out in the middle of the ocean by yourself,” said Michael Murphy, head trader at Wachovia Securities in Baltimore. “Until we get some good news, it’s just going to be like this. People looking for reasons not to buy stocks.”

The Dow Jones industrial average inched up 3.40 points, or 0.03%, to 10,318.16.

Broader stock indicators also were narrowly higher. The Standard & Poor’s 500 index gained 2.51 points, or 0.2%, to 1,128.33, its highest since July 1. The Nasdaq composite index was up 5.02 points, or 0.3%, to 1,915.40, its highest since July 20.

Although all the indexes posted slight gains, declining issues narrowly outnumbered advancers on the New York Stock Exchange and on Nasdaq.

With many consumers recently unwilling to spend on big-ticket items like cars, Wall Street is concerned that they remain nervous about the economy and may cut their spending further.

“It’s no mystery that consumers are spending more on energy and fuel costs, and that’s started to filter down,” said Scott Wren, an equity strategist for A.G. Edwards & Sons. “What this boils down to is we need something that’s going to encourage consumers and help drive spending. We need to see better job growth and a better overall economy.”

U.S. Treasury bond yields were little changed. The tepid retail sales report was cited by some as a sign that the Federal Reserve may go slower than expected as it tightens credit, although it still is expected to raise its benchmark short-term rate to 1.75%, from 1.50%, when policymakers meet next week.

“We suspect that if the economy remains as soft as it has been lately, the Fed may very well decide a break is in order somewhere along the way,” said Chris Low, chief economist at FTN Financial.

The yield on the benchmark 10-year T-note eased to 4.13% from 4.14% Monday.

In other market highlights:

* Many auto-related stocks were lower on the industry’s cloudy outlook. Ford lost 12 cents to $13.98 and General Motors fell 35 cents to $42.65, although DaimlerChrysler edged 2 cents higher to $43.53.

Among parts makers, Magna International fell 72 cents to $71.40, Tenneco Auto was down 52 cents to $12.83 and Dana declined 39 cents to $18.08.

* Office Depot tumbled $1.10 to $15.10 after saying it expects its third-quarter earnings to fall below Wall Street estimates and cutting its full-year outlook due to slumping sales. Home decor chain Pier 1 Imports gained $1.06 to $18.90. The company said sales fell in the latest quarter, driving earnings down 43% from a year ago, but it beat analysts’ forecasts by a penny.

* McDonald’s climbed 43 cents to $27.60 after raising its annual dividend 38%, to 55 cents a share. The dividend boost is the company’s second-largest since 1980 and follows a 20% increase in cash flow in the second quarter and 16 consecutive months of higher sales.

* Internet-related shares were broadly higher. Google jumped $3.99 to $111.49, EBay gained $2.31 to $94.41, Yahoo rose $1.33 to $33.20 and Ask Jeeves soared $3.46 to $30.46.

* MGM shares rose 14 cents, to $11.69, a day after Sony announced a deal with Comcast and other partners to buy the fabled studio. Sony slipped 16 cents, to $35.66, and Comcast’s Class A shares fell 5 cents to $28.07.

* Cardinal Health, a drug distributor being investigated by federal regulators, rallied $2 to $47.49. The company said it would restate at least three years of results and delayed its fiscal fourth-quarter report. The effect of the restatement will be minimal, said Kevin Berg, an analyst with Credit Suisse First Boston in New York.