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Stocks zigzag after rally as the dollar rises

INVESTORS cooled their buying of stocks and commodities, pausing from a surge that carried major stock indexes to their highest levels in more than a year.

Stocks ended mixed yesterday. The Dow Jones industrials tacked on 20 points a day after shooting up 200 points for the second time in three days.

The market again took its direction from the dollar, as it has for months. Stocks drove higher Monday as the dollar weakened and slipped yesterday as the currency rose.

The Dow swung in a range of about 60 points in light trading as investors increased their buying of safe-haven assets like the dollar and Treasurys. The ICE Futures US dollar index, which measures the dollar against other currencies, edged higher.

"People are reaching for a little less risk today after we've had such a run," said Bill Stone, chief investment strategist at PNC Wealth Management.

The Dow rose 20.03, or 0.2 percent, to 10,246.97, its fourth straight advance and its highest close since Oct. 3, 2008. The Dow traded up to 10,260.80, a 12-month.

The broader Standard & Poor's 500 index fell 0.07, or less than 0.1 percent, to 1,093.01, after six straight days of gains. The Nasdaq composite index fell 2.98, or 0.1 percent, to 2,151.08.

Record-low interest rates in the U.S. and the resulting slide in the dollar have been major forces behind the surge in stocks in recent months. A weaker dollar allows investors to borrow money cheaply, while the low interest rates also encourage them to hold any assets other than low-yielding cash, such as stocks, commodities and bonds.

The falling dollar has enabled many investors to look past some of the economy's persistent trouble spots, including unemployment. The jobless rate rose to 10.2 percent in October, the highest level in 26 years.

A number of market watchers still believe the recent surge in stocks has been overdone given the weaknesses that remain in the economy, such as the large amounts of souring loans on banks' balance sheets.

Still, some analysts said the market's ability to hold its gains is a welcome sign.

Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, said it is encouraging that the market is holding its gains and isn't as volatile as last month when big advances would be followed by big drops. He said a day of modest moves is a healthful sign of a market consolidating its gains.

"It's kind of what you call a coffee day," he said, referring to the market's small moves. "We expect that we'll continue to stair-step higher to the end of the year."

Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 1.1 billion shares, compared with 1.2 billion Monday.

Bond prices mostly rose, sending yields down, after an auction of 10-year notes drew decent demand. The 10-year yield fell to 3.48 percent from 3.49 percent late Monday.

In corporate news, bond insurer MBIA Inc. tumbled US$1.28, or 26.7 percent, to US$3.52 after posting a third-quarter loss on weaker results at its insurance business.

American International Group Inc. rose after analysts at Moody's Investor Service projected that the insurer will have adequate resources to repay the federal government. The government has injected more than US$182 billion in aid to the company to help stabilize the financial system. AIG rose US$1.41, or 3.9 percent, to US$37.59. Inc. jumped to a nine-year high after the online travel booking company said it was seeing an increase in customers booking airfare and hotel rooms. The stock rose US$30.49, or 17.6 percent, to US$204.22 after trading as high as US$209.19.

Beazer Homes USA rose after the homebuilder turned a fiscal fourth-quarter profit despite a plunge in revenue and said it saw "some moderation" in weak market trends. The stock rose 41 cents, or 8.7 percent, to US$5.10.

Fluor Corp. fell US$3.63, or 7.6 percent, to US$44.38 after the engineering and construction company posted an 11 percent drop in its third-quarter profit as revenue fell at its oil and gas and power divisions.

In other trading, the Russell 2000 index of smaller companies fell 5.34, or 0.9 percent, to 586.97.


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