updated 3/4/2004 11:00:52 AM ET 2004-03-04T16:00:52

A bullish assessment of the economy from the U.S. Federal Reserve gave most stocks a modest lift Wednesday, but the buying lacked conviction as Wall Street looked ahead to a key report on the struggling U.S. labor market due later in the week.

Major Market Indices

The Fed’s report that manufacturing activity and consumer spending rose over the last two months, while jobs growth remained sluggish, helped temper concerns about a coming interest rate hike. But analysts said the survey of the nation’s business climate did not hold enough upside surprise to move the markets significantly higher.

“There was nothing in the report to upset the apple cart one way or the other,” said Simon Melluish, head of U.S. equities at Gartmore Mutual Funds. “We’re treading water a bit, waiting until we get new bits of news.”

The Dow Jones industrial average ended the day up 1.63 points, or 0.02 percent, at 10,593.11, after spending most of the session in negative territory. Broader stock market gauges finished mixed.

The Nasdaq composite index declined 6.29 points, or 0.3 percent, to 2,033.36, but was well off its intraday lows. The Standard & Poor’s 500-stock index closed up 1.93 points, or 0.2 percent, at 1,151.03.

Generally good economic news and strong fourth-quarter earnings have raised optimism about the current economic recovery, but a pattern of uneven trading has developed as investors grow increasingly nervous about when rates will rise.

Stocks sank Tuesday after Fed Chairman Alan Greenspan reiterated his view that interest rates must go up eventually.

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The Fed has said it would be patient with its interest rate policy, but repeated indications that rates are set to rise have helped boost the dollar from its doldrums this week.

Its rise against foreign currencies, including the Japanese yen, raised concerns about waning demand for U.S. Treasuries from Asian central banks, and sent bond prices lower and yields higher.

The Fed survey, dubbed the Beige Book for the color of its cover, only whetted Wall Street’s appetite for the government’s February employment report, due out Friday.

An upbeat reading could help the market gain momentum. The importance of the labor market was underscored Monday, when stocks moved sharply higher after the Institute for Supply Management reported better-than-expected jobs growth in the manufacturing sector.

“The rally was based on the expectation of a stronger economy and now we’ve got to see it,” said Ken McCarthy, chief economist at vFinance Investments. “To get to the next level to rise, we have to actually see the growth in employment.”

Walt Disney Co. was down 11 cents at $26.65 as embattled chief executive Michael Eisner presided over the company’s annual meeting in Philadelphia. A recent hostile takeover bid from Comcast Corp. has fed disappointment in the company’s performance, and anger toward Eisner. Comcast was up 47 cents at $30.40.

Wal-Mart Stores Inc. gained 81 cents to $60.36 after announcing plans to raise its quarterly dividend to 13 cents, up from 9 cents a share. The retailer, which has increased its dividend annually since 1974, said this year’s hike will return more than $2.2 billion to shareholders.

Toys “R” Us Inc. added $1.09 to close at $16.39 after reporting lower fourth-quarter earnings and announcing plans to sell its shuttered Kids “R” Us stores to Home Depot.

AutoZone Inc., the nation’s largest auto-parts chain, sank $4.76 to $83.64 after posting a jump in quarterly profits, but flat sales.

Investors largely ignored a report on the huge U.S. services sector, released after the opening bell Wednesday and came in slightly below most economists’ expectations.

The Institute for Supply Management's non-manufacturing index fell to a 60.8 reading in February from 65.7 in the prior month, missing analysts consensus expectations for a 63.5 number. A reading above 50 indicates growth.

Advancing issues slightly outnumbered decliners on the New York Stock Exchange. Volume was 1.32 billion shares, compared with 1.48 billion shares traded Tuesday.

Overseas, Japan’s Nikkei average fell 0.1 percent Wednesday. In Europe, France’s CAC-40 shed 0.7 percent, Britain’s FTSE 100 lost 0.3 percent and Germany’s DAX was down 0.7 percent.

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

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