Stocks closed narrowly mixed in moderate, choppy trading after the government released a weaker than expected report on construction of single-family houses and apartments.
* Treasury bond yields retreated as traders reacted positively to lackluster economic reports and an unexpectedly early Federal Reserve purchase of government securities.
The market spent most of the day drifting up and down, with little dramatic movement one way or the other.
Health care stocks fared the worst. The issues have plunged recently on President Clinton's conflict with the industry over pricing.
The Dow Jones average edged up 0.54 of a point to close at 3,442.95, while declining and advancing issues were just about even on the New York Stock Exchange. Volume on the floor of the Big Board came to 218.82 million shares, up from 195.93 million in the previous session.
Early on, the Commerce Department said housing starts rebounded 2.5% in February, less than the 4.5% many private economists had expected.
The same report showed applications for building permits, often a barometer of future activity, fell for a second straight month.
"The numbers weren't very conclusive one way or the other," said Robert Stovall, president of Stovall 21st Advisers. "The market is groping around for a trend."
A report on consumer prices in February will be released today. Economists forecast a 0.3% rise from January.
Analysts said investors will be screening the government's inflation data even more closely than usual after a report Friday showed a surprising 0.4% jump in the producer price index for February. It was the biggest monthly rise since November, 1990, and helped trigger a 50-point selloff on Thursday and Friday.
Among the market highlights:
* Merck fell 3/4 to 37 7/8, Bristol-Myers Squibb fell 1 1/2 to 56 1/8, and Pfizer lost 2 1/8 to 60.
* Ethan Allen Interiors, a leading furniture retailer, topped the NYSE's list of the most-active stocks, in its first day of trading. It closed at 20 1/4 after being priced at 18.
* Citicorp rose 1 to 29 5/8 after an analyst raised its earnings estimates for the bank.
* Chemical Waste slumped 2 1/8 to 17 1/8 after it said first-quarter earnings would be below analysts' estimates. That prompted at least five brokerage houses to cut their ratings on the company. Chemical Waste's majority owner, Waste Management, lost 2 1/8 to 35 3/4.
* On the NASDAQ market, two initial public stock offerings were among the most actives. Wall Data Inc., a maker of software products, ended at 22 3/4, up from its initial pricing at 20. Retailer Pacific Sunwear closed at 15 3/4 after being priced at 13.
Stocks closed lower in overseas trading. Tokyo stocks ended lower on consolidation after seven consecutive days of gains. The 225-share Nikkei average fell 117.88 points to 17,968.30. Shares also closed lower in Frankfurt. The DAX 30-share average ended at 1,697.83, down 4.74. London's Financial Times 100-shares average finished 3.1 points down at 2,919.3.
Trading was light as investors awaited the government's consumer prices report.
The yield on the Treasury's 30-year bonds fell to 6.87% from Monday's 6.89%. The long bonds' price, which moves in the opposite direction from the yield, rose 9/32 point, or $2.81 per $1,000 in face amount.
In the last three trading days, the price of the long bond has plunged nearly 1 7/8, largely because of worries over a sharper than expected rise in producer inflation and in commodity prices.
But traders were cheered when the Fed entered the market around midday, driving up prices.
The central bank, which periodically buys or sells large amounts of government securities to replenish or drain reserves from the nation's banking system, was expected to enter the market later this month to replenish bank reserves depleted by corporate and individual income tax payments.
Also helping bonds was the negative housing starts report.
Signs of economic weakness tend to push bond prices higher as a sluggish economy usually is accompanied by low inflation. Inflation erodes the value of fixed-income investments such as government securities.
The federal funds rate, the interest on overnight loans between banks, fell to 2% from 3.125% late Monday.
The dollar rose against most major currencies but fell against the Japanese yen as Japan's trade surplus with the United States widened. Japan's trade surplus with the U.S. rose 19% to $4.37 billion in February, marking the 26th consecutive month it had been higher than a year earlier.
In addition, the Japanese finance ministry said the surplus would be even greater in March.
In New York, the dollar traded at 117.00 Japanese yen, down from 118.65 yen late Monday.
The greenback fell to 1.664 German marks, up from 1.663 late Monday. The British pound fetched $1.449, up from Monday's $1.435.
News of slower housing construction hammered lumber futures prices, one day after the market posted a record high.
Spruce two-by-fours for May delivery dropped the permitted daily limit of $10 to $448.20 per 1,000 board feet on the Chicago Mercantile Exchange.
Analysts attributed the selloff mainly to the Commerce Department's housing starts report
Meanwhile, on the New York Commodity Exchange, gold bullion traded at $329.10 an ounce, off 20 cents from Monday. Republic National Bank of New York quoted a late bid for gold at $328.85 an ounce, also off 20 cents. Silver slipped 0.6 cent to $3.648 an ounce.
Light, sweet crude oil for April delivery fell 3 cents to $20.13 a barrel on the New York Mercantile Exchange.
Market Roundup, D6