updated 10/18/2007 8:30:13 AM ET 2007-10-18T12:30:13

Wall Street ended a volatile session mixed Wednesday as investors’ concerns about sluggish housing and tight credit intensified their uneasiness over a motley batch of corporate profits. Rising oil prices only added to the market’s malaise.

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Earnings reports from Yahoo Inc. and Intel Corp. were upbeat and incited some buying in the technology sector, which drove the Nasdaq composite index sharply higher.

But the Dow Jones industrial average dipped, with investors uncertain about how well corporate America overall will fare going forward — particularly after International Business Machines Corp. reported modest software sales and United Technologies Group Inc. said 2008 will be challenging.

Peter Dunay, an investment strategist with New York-based Leeb Capital Management said third-quarter earnings are expected to be weak, and lackluster forecasts for future quarters are unnerving investors.

“We’re not getting very strong guidance numbers, and at the same time last week we were at new highs,” Dunay said.

The Dow and the Standard & Poor’s 500 index both hit records last week, but Wall Street has pulled back cautiously since then, exhibiting nervousness about the slowing economy. On Wednesday, the Federal Reserve said in its Beige Book that growth cooled in the third quarter. Investors are also jittery about accelerating inflation — which could prevent the Fed from lowering rates again — after oil prices momentarily touched a fresh high of $89 per barrel.

And the lending landscape continues to deteriorate. Standard & Poor’s cut the ratings on 1,713 classes of securities backed by mortgages issued in the first six months of this year. They were valued at $23.35 billion.

The Dow fell 20.40, or 0.15 percent, to 13,892.54, paring the session’s worst losses. The Dow fell more than 130 points in earlier trading.

Broader indexes rose. The S&P 500 index climbed 2.71, or 0.18 percent, to 1,541.24, while the Nasdaq gained 28.76, or 1.04 percent, to 2,792.67.

Wall Street’s mixed movements come after two days of broad declines.

In another sign that the economy could weaken further, the Commerce Department said new home construction slowed to the weakest pace in 14 years during September. Bond prices rose sharply on the news. The yield on the 10-year Treasury note, which moves inversely to the price, fell to 4.55 percent from 4.66 percent late Tuesday.

Investor expectations for the third quarter had been low, given the turmoil in the financial and credit markets during the summer. Some early profit reports — particularly in the financial sector — proved disappointing. Strong results from component companies of the Dow — including JPMorgan Chase & Co. and Intel Corp. — didn’t offset investor unease over results from two other components, IBM and United Technologies.

United Technologies fell $2.85, or 3.6 percent, to $76.80, despite a 20 percent rise in profit. The company said it sees international growth moderating and more slowdown in the U.S. economy.

IBM lost $3.82, or 3.2 percent, to $115.78. The computer maker posted a 6 percent profit rise, but investors focused on the modest 3 percent rise in software revenue.

JPMorgan rose $1.26, or 2.8 percent, to $46.37 on the bank’s 2 percent rise in profit despite big writedowns related to soured mortgages and leveraged corporate debt.

Yahoo said late Tuesday that third-quarter profits fell less than analysts had expected, raising hopes of a turnaround. The Internet search company gained $2.13, or 8 percent, to $28.82.

Chipmaker Intel posted a 43 percent increase in third-quarter earnings. The company’s shares jumped $1.24, or 5 percent, to $26.72.

Beyond earnings, investors absorbed two economic reports that appeared to give the Fed more wiggle room in cutting rates. Central bankers will next meet Oct. 30-31.

U.S. consumer prices rose modestly last month, suggesting there are still inflation risks, but they likely wouldn’t get in the way of an interest rate cut. The consumer price index rose 0.3 percent in September, reversing August’s 0.1 percent decline. The core CPI, which excludes often volatile food and energy prices — and which the Fed monitors — advanced 0.2 percent for a fourth-straight month.

Although core inflation remains tame, surging food and energy costs could trickle down, heating up overall inflation and attracting the Fed’s attention.

“You have to wonder about whether the Fed is still going to be accommodative,” said Jack Caffrey, equities strategist at J.P. Morgan Private Bank.

The Russell 2000 index of smaller companies rose 1.54, or 0.19 percent, to 824.89.

Oil gave up the gains of an earlier rally. A barrel of light, sweet crude lost 22 cents to $87.29 on the New York Mercantile Exchange.

Gold prices rose, and the dollar was mixed against other major currencies.

Advancing issues narrowly outnumbered decliners on the New York Stock Exchange, where consolidated volume came to 3.50 billion shares, up from 3.13 billion Tuesday.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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