Stocks fluctuate as economy shows signs of stabilizing but housing lags

NEW YORK -- Stocks fluctuated in a narrow range Thursday as investors shuttled between worries about the housing industry and hopes that the economy might be stabilizing.

Investors saw a bigger appetite for oil and drew support from crude's advance to a six-month high above $64 a barrel. A dip in weekly unemployment claims and an increase in sales of big-ticket manufactured goods also gave reasons to believe the economy will start growing and lift demand for raw materials.

But disappointing reports on the housing market kept a lid on the optimism. The government said sales of new homes edged up only 0.3% in April, less than analysts expected. A separate report showed that a record 12% of mortgage holders were behind or in foreclosure in the first quarter.

In afternoon trading, the Dow Jones industrial average was down 12.35, or 0.2%, to 8,287.67. The broader Standard & Poor's 500 index rose 2.11, or 0.2%, to 895.17, and the Nasdaq composite index fell 2.74, or 0.2%, to 1,728.34.

Light, sweet crude rose $1.10 to $64.55 a barrel on the New York Mercantile Exchange.

Volatility in interest rates also tugged at the market.

On Wednesday, stocks tumbled following a plunge in Treasury bond prices and a corresponding spike in interest rates. Investors grew fearful that higher borrowing costs would choke the economy's recovery. The yield on the Treasury's 10-year note — a key benchmark for home mortgages and other kinds of loans — reached its highest level since November. The note recovered some of those losses Thursday but then gave back some of its gains, leaving traders on edge.

The yield on the 10-year Treasury note, which moves opposite its price, pulled back to 3.71% from 3.75% late Wednesday.

Investors also looked for insights into the prospects for General Motors, which said a committee of bondholders agreed to a sweetened deal to erase some of the automaker's unsecured debt in exchange for stock. The agreement may not prevent GM from seeking bankruptcy court protection, but investors are eager for any signs that a reorganization would be orderly. GM shares rose 6 cents, or 5.2%, to $1.21.