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Stocks resume rise after new housing data

Updated at 4:05 p.m. ET: Stocks edged higher on Wednesday as equities continued to churn in the wake of a central bank-driven rally, with gains in housing-related stocks outweighing weakness in energy.

Economic data showed the pace of home resales rose 7.8 percent in August, its fastest pace in over two years, while groundbreaking on new homes also climbed, hopeful signs that a budding housing market recovery is gaining traction.

The report comes as investors look for improving economic data to help bolster a rally of more than 6 percent in the S&P 500 since the start of August, culminating in the decision by the Federal Reserve last week to launch a new round of economic stimulus.

"You've had a huge run-up, you're just above resistance, so it is natural to take a breather here. You would expect a consolidation maybe to the 1,430 or 1,440 area." said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"You've got a lot of pressure in some of the energy space and some of the other commodity space."

Oil-related stocks fell and kept a cap on gains as U.S. crude slid for the third straight day after Saudi Arabia said it would take action to keep prices in check.

Industrial conglomerate 3M Co was the latest major U.S. company after FedEx to caution about the economy. 3M said the "economic environment has changed" since the company adopted its long-term 7-8 pct revenue growth target, and it now views that range as a "stretch target.”

Both 3M and FedEx are viewed as economic bellwethers because they are involved with so many sectors of the economy. Their warnings come as S&P 500 companies are expected to post a 2 percent contraction in third quarter earnings.

As of Friday, there were 88 major companies which have lowered their profit expectations compared to 21 positive announcements. The ratio is the weakest showing since the third quarter of 2001, according to Thomson Reuters data.

"You are coming into the earnings warnings season and then we are coming into earnings. (That) is clearly something that could put the market on hold until we start to see some numbers," said Mendelsohn.

Reuters contributed to this report.