Stocks ended mixed Tuesday as upbeat economic data encouraged some investors to cash in profits from the spring rally.
Those same economic reports helped drive Treasury bond yields higher, amid some doubts that the Federal Reserve would cut interest rates further.
The Dow Jones industrial average, which had soared 201 points Monday, traded in a narrow range Tuesday and ended up 4.06 points at 9,323.02.
The Nasdaq composite eked out a gain of 1.86 points to 1,668.44, and the Standard & Poor's 500 was up 0.92 point to 1,011.66.
But falling stocks outnumbered winners by 6 to 5 on the New York Stock Exchange.
Investors who have been bidding stocks higher this spring, betting on a stronger economy, got some evidence that a revival is happening: The Federal Reserve said production at the nation's factories and utilities edged up in May. It was the first gain in industrial output since February.
Also, the Commerce Department said housing construction rose 6.1% in May, indicating continued strength in that sector.
Another report showed that consumer prices were unchanged in May after falling in April. The May data may have lessened some investors' fears that the economy might be entering a broad-based deflation -- a concern raised by the Federal Reserve in recent months.
But the flat performance of the consumer price index, along with other encouraging economic data, could give the Fed a reason to leave short-term interest rates unchanged when policymakers meet next week, some analysts said. Much of Wall Street had been betting on another Fed rate cut.
"I think the CPI number took some people by surprise; it maybe has the market thinking the Fed might be a little less aggressive at the end of the month," said Dennis Ferro, chief investment officer of Evergreen Investments.
Bond yields, which hit generational lows last week, rose on the economic news. The 10-year Treasury note ended at 3.26%, up from 3.17% on Monday and a 45-year low of 3.11% on Friday.
At brokerage Morgan Stanley in New York, market strategist Steven Galbraith urged clients to scale back investments in U.S. stocks and bonds and keep more assets in cash for the time being.
"The recent powerful rallies have materially lowered expected returns in stocks and bonds," Galbraith wrote in a report to clients, according to Bloomberg News.
Galbraith cut his recommended stock weighting to 65% from 70%, and the bond weighting to 20% from 25%. His recommended cash allocation rose to 15% from 5%.
Still, many analysts believe the stock market rally has further to run, if the economy is in fact turning up.
"The market looks like it's in pretty good shape," Mark Bronzo, who helps oversee $2 billion at Gartmore Separate Accounts, told Bloomberg News. "It's a difficult market at this point to bet against."
Among Tuesday's highlights:
* Drug stocks gained after Pfizer said 2004 earnings and sales will beat analyst estimates, helped by cost savings from the firm's acquisition of Pharmacia.
Pfizer jumped $1.58 to $36.18, Merck rose $1.57 to $62.37, and Eli Lilly was up $1.98 to $69.83.
* Major tech stocks were mixed. Microsoft rose 57 cents to $25.96 after brokerage Lehman Bros. said the company's stock might be overdue for a rally. The stock is up 0.4% this year, compared with a 15% gain in the S&P 500.
But Intel lost 42 cents to $21.45, and Dell Computer was flat at $32.35.
* Restaurant stocks attracted buyers. Cheesecake Factory surged $1.76 to $35.35, Panera Bread gained $2.36 to $39.46, and P.F. Chang's China Bistro jumped $1.11 to $47.
* Profit-taking hit real estate investment trust shares. Vornado lost 68 cents to $43.35, and Kimco slid 73 cents to $37.55.
* Duke Energy added $1.09 to $20. Moody's Investors Service lowered its rating of the company's debt, but still kept it investment grade.
* Video game makers rallied as some brokerages said sales were strong in May. THQ leaped $1.86 to $19.50, and Activision jumped 62 cents to $13.03.
Market Roundup, C6-7