Stocks edge higher on housing, inflation data

Fresh signs of a weak economy gave investors a reason to sell stocks for a second day.

The market extended its pullback Tuesday as news of a seventh straight monthly drop in industrial production overshadowed better-than-expected reports on home construction, building permits and inflation.

The major stock indexes each slid more than 1%, with the Dow Jones industrial average falling 107 points. That brought its decline over two days to nearly 300 points, or 3.3%.

The economic reports Tuesday sent Treasury bond yields down further from their recent peaks, putting more downward pressure on mortgage rates.

The dollar -- which surged Monday against other major currencies, pushing down commodity prices -- gave back some of that gain Tuesday after the Kremlin’s top economic advisor said Russia might invest part of its currency reserves in bonds issued by Brazil, China and India. The fallback in the U.S. currency allowed prices of some commodities to rebound somewhat.

The Dow fell 107.46 points, or 1.3%, to 8,504.67. The Standard & Poor’s 500 index fell 11.75 points, or 1.3%, to 911.97, while the Nasdaq composite index fell 20.20, or 1.1%, to 1,796.18.

The Russell 2,000 index of smaller companies fell 1.6%.

About two stocks fell for every one that rose on the New York Stock Exchange.

On Monday, the Dow tumbled 187 points, or 2.1%, putting it back into the red for 2009, one trading day after reentering positive territory for the first time since January.

Among the day’s positive economic reports, the Commerce Department said home construction jumped in May after hitting a record low in April.

Applications for building permits, considered a good indicator of future activity, rose 4%.

And the Labor Department said wholesale prices rose in May as a big jump in the price of gasoline offset a drop in food costs. But the overall increase was less than expected.

Industrial production fell 1.1% in May, more than expected, as the recession hurt demand for manufactured goods, including cars, machinery and household appliances, the Federal Reserve reported.

The industrial data helped give Treasury bond yields their fourth consecutive daily decline. The 10-year T-note yield, a benchmark for home loan rates, fell to 3.67% from 3.71% on Monday. The yield set an eight-month high of 3.99% on June 10.

Thirty-year conventional mortgage rates nationwide were averaging about 5.55% on Tuesday plus 0.33 of a point in upfront fees, said Keith Gumbinger, a principal at rate tracker HSH Associates.

The loan rate average was down from a peak of 5.81% last week, he said.

Despite the renewed economic worries, prices of many commodities -- including precious metals, soybeans and coffee -- rose Tuesday as the dollar weakened. Near-term gold futures climbed $4.70 to $931.60 an ounce in New York trading.

But crude oil futures fell 15 cents to $70.47 a barrel.

And an index of 19 major commodities fell 0.2% after slumping 2.2% on Monday. As a result, shares of raw-material producers fell 2.4% on Tuesday on average, for a three-session loss of 7%.

Overseas, key stock indexes slid 2.9% in Japan and 0.2% in France. Shares edged up in Britain and Germany.