Investors nudge rally forward with small gains in stocks

NEW YORK -- Having sprinted higher for three weeks, the stock market is taking a break.

Investors made few big moves Tuesday after stocks rocketed 14 percent in just 16 days. The market closed with modest gains as many traders held their positions and looked toward the Labor Department's employment report Friday.

The Dow Jones industrial average rose 34 points. On Monday, the blue chips jumped 115 points and the Standard & Poor's 500 index nosed above 1,000 for the first time in nine months.

Tuesday's mostly upbeat news helped prevent the market's pause from turning into the type of slide that can follow big jumps. Analysts have been predicting stocks would idle after such a strong run, and some saw investor caution at work.

"There is a lot of concern that the market has moved too far too fast and that we've gotten ahead of the economy," said Brian Bush, director of equity research at Stephens Inc.

But the Commerce Department's report of an increase in consumer spending and the National Association of Realtors' report of a rise in pending home sales provided evidence that the economy could be stabilizing. And Caterpillar Inc. predicted that cost cuts and other efforts will enable it to turn profits in the coming years even if the economy is slow to recover. Traders follow the world's largest maker of construction and mining equipment for signals about the overall economy.

The Dow rose 33.63, or 0.4 percent, to 9,320.19. The S&P 500 index rose 3.02, or 0.3 percent, to 1,005.65, while the Nasdaq composite index rose 2.70, or 0.1 percent, to 2,011.31. The gains left stocks at new highs for the year.

Stocks jumped more than 1 percent Monday on upbeat reports on manufacturing, housing and banking.

The advance adds to the Dow's July gain of 8.6 percent that injected a stalled spring rally with new energy. The Dow is still down 34 percent from its peak in October 2007.

Traders are likely to grow a little more anxious as they await the Labor Department's report for July. Unemployment stands at a 26-year high of 9.5 percent and is expected to eventually top 10 percent. Investors are looking for the pace of layoffs to slow so the economy can heal.

"The second half of the week is going to be heavily dominated by the employment data," said John Canally, economist at LPL Financial. "That is keeping markets hesitant."

Some analysts predict stocks will continue to climb as investors use dips to put money into the market. Recent corporate earnings reports and economic data have indicated that the nearly two-year-long recession could be ending.

The Commerce Department said Tuesday that consumer spending rose 0.4 percent in June. But personal incomes dropped by 1.3 percent, the steepest slide in four years.

Meanwhile, the Realtors said pending home sales for a fifth straight month in June.

Bond prices fell, pushing the yield on the benchmark 10-year Treasury note up to 3.69 percent from 3.64 percent late Monday.

The dollar was mixed, while gold prices rose.

Oil prices shed 59 cents to $70.99 a barrel on the New York Mercantile Exchange.

Three stocks rose for every two that fell on the New York Stock Exchange. Consolidated volume rose to 5.8 billion shares from 5.7 billion Monday.

The Russell 2000 index of smaller companies rose 4.96, or 0.9 percent, to 570.74.

Overseas, Britain's FTSE 100 and Germany's DAX index lost 0.2 percent, and France's CAC-40 slipped less than 0.1 percent. Japan's Nikkei stock average rose 0.2 percent.