updated 7/18/2006 8:37:35 AM ET 2006-07-18T12:37:35

Stocks fluctuated in fitful trading Monday as Wall Street weighed the situation in the Middle East and an earnings report from Citigroup, the latest in a string of uninspiring corporate results.

Major Market Indices

With violence in Israel and Lebanon continuing into a sixth day, oil prices nonetheless edged lower as world leaders weighed their options, including a possible United Nations peacekeeping force. A barrel of light crude was quoted at $76.15, down 88 cents, on the New York Mercantile Exchange.

Yet with no resolution in sight, the markets remained wary.

“Unfortunately, right now this conflict in the Middle East is the elephant in the room, and nothing’s going to happen until there’s a little more clarity there,” said Jack Ablin, chief investment officer at Harris Private Bank. “This is probably a market best viewed from the sidelines.”

The U.S. economy continued to show strength, with industrial production rising 0.8 percent in June, according to the Federal Reserve, far better than the 0.4 percent growth economists expected. That encouraged investors who had feared the economy would have trouble withstanding high energy prices and higher interest rates.

In late morning trading, the Dow Jones industrial average rose 20.14, or 0.19 percent, to 10,759.76. The index had been up 63 points, then fell by more than 24 points before recovering — all in the first 90 minutes of trading.

Broader stock indicators were narrowly mixed. The Standard & Poor’s 500 index fell 0.44, or 0.04 percent, to 1,235.76, and the Nasdaq composite index climbed 2.73, or 0.13 percent, to 2,040.08.

While the Fed’s overall production data was strong, a report by the New York Federal Reserve showed slower-than-expected manufacturing growth in New York state. The Empire State Index fell to 15.6 in July from 29 in June. Economists expected the index to fall to 20.

The conflicting manufacturing reports pressured bonds, with the yield on the benchmark 10-year Treasury note rising to 5.08 percent from 5.07 percent late Friday. The dollar made gains against most major currencies, and gold prices also climbed.

Dow industrial Citigroup was another in a line of mildly disappointing earnings reports that have stoked investors’ concerns over stocks in recent weeks. Citigroup just missed Wall Street’s profit forecasts by a penny per share, and its stock fell $1.20 to $46.38.

The news countered a strong sales report from fellow Dow component McDonald’s Inc., which rose $1.28 to $34.32 after posting a 5.9 percent increase in June sales at stores open at least a year. The fast-food chain credited strong overseas sales and increasing breakfast demand for the gains.

Mattel Inc. posted a quarterly gain after a year-ago loss, with sales boosted from tie-in products from the “Superman Returns” and “Cars” films even as its core Barbie and Hot Wheels lines slipped. Mattel jumped $1.48, or 9.3 percent, to $17.36.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 421.3 million shares, compared with 462.16 million traded at the same point Friday.

The Russell 2000 index of smaller companies was down 0.63, or 0.09 percent, at 680.61.

Overseas, concerns over the Middle East and North Korea’s nuclear program sent Japan’s Nikkei stock average tumbling 1.67 percent. In afternoon trading, Britain’s FTSE 100 was up 0.06 percent, Germany’s DAX index fell 0.04 percent, and France’s CAC-40 lost 0.32 percent.

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