A weaker economic forecast from the Federal Reserve chilled, but didn't break, the stock market's winning streak.
Stocks closed mixed Wednesday, with the Dow Jones industrial average rising almost 4 points for its seventh straight advance. The other major market indexes also had single-digit moves. Bond prices rose as investors, again uneasy about the strength of the economic recovery, went in search of safe investments.
The Fed's economic forecast was only slightly more downbeat than the outlook issued in April. And investors have been well aware that the country faces a bumpy recovery. But the Fed's assessment was still a sharp reminder that economic growth won't come easily.
Investors initially sold on the Fed's statement. A strong start to second-quarter earnings reports, including upbeat forecasts from Intel Corp. and Alcoa Inc., helped temper their disappointment.
The Fed lowered its projection for the gross domestic product, the broadest measure of the economy, and said GDP will grow between 3 percent and 3.5 percent this year. That's down from the 3.2 percent to 3.7 percent forecast in April.
The central bank also said the unemployment rate, now at 9.5 percent, will at best fall to 9.2 percent. In its April forecast, the Fed had a slightly lower bottom number of 9.1 percent.
The Fed also released minutes from its June 22-23 meeting, at which it found that "economic developments abroad" could hurt the U.S. economy. That's a reference to the debt crisis that began in Greece and threatened to spread to other European countries.
While the Fed's statement contained no real surprises, investors are particularly cautious after the advances of the past week and because so much of corporate earnings reports are still ahead, said Rob Lutts, president and chief investment officer of Cabot Money Management in Salem, Mass.
"It's been a very strong last three or four days. And at this point, valuations are a little higher and a little more of a challenge," he said.
And after the beating stocks took this spring, he said, investors remain more cautious than in any down investment cycle in memory. That caution is reflected in how they are continuing to move money into bonds.
"We need time to heal, more than anything else," Lutts said.
Analysts said investors were initially unnerved by the Fed's long-term outlook.
"The Fed is talking about 5 to 7 years time before the economy gets back to the old modus operani," said Joseph V. Battipaglia, market strategiest for the Private Client Group at Stifel Nicolaus & Co. "This is the government admitting that the coast is not clear because the outlook is a slower environment and unemployment stays doggedly high."
The Dow rose 3.70, or 0.04 percent, to 10,366.72. The Standard & Poor's 500 index fell 0.17, or 0.02 percent, to 1,095.17, while the Nasdaq composite index rose 7.81, or 0.4 percent, to 2,249.84.
Losing stocks were ahead of gainers by 4 to 3 on the New York Stock Exchange. Consolidated volume came to 4.1 billion shares, down from Tuesday's 4.7 billion.
Bond prices rose, pushing interest rates lower in the Treasury market. Investors were following their pattern of turning to government debt as a safe place to put their cash when the economy looks troubled.
The yield on the benchmark 10-year Treasury note fell to 3.05 percent from 3.13 percent late Tuesday. That yield helps set interest rates on mortgages and other consumer loans.
Earlier Wednesday, there was disappointing economic news from the Commerce Department, which said June retail sales fell 0.5 percent. That's worse than the 0.2 percent decline forecast by economists polled by Thomson Reuters. However, excluding autos, sales were down 0.1 percent, in line with expectations.
Shares of retailers including J.C. Penney Co., Macy's Inc. and Target Corp., all fell after the monthly sales report.
Late Tuesday, Intel reported its biggest quarterly profit in a decade as large corporations started buying new computers. Companies have been reluctant to upgrade technology during the recession, so a return of spending could be a sign corporations are ready to start expanding their businesses again and hire new workers.
Intel's profit and outlook, which surpassed analysts' forecasts, are considered good signs for the economy because the chipmaker manufactures 80 percent of the processors that run PCs and has a large global reach.
Although the market's rally stalled Wednesday, the Dow is up 7 percent over seven days, its best stretch since last July. The Dow rose 147 points Tuesday after aluminum producer Alcoa and railroad company CSX both reported better-than-expected profit. The pair also provided optimistic outlooks for the rest of the year.
Stocks slumped in May and June as economic reports showed the recovery wasn't proceeding as fast as hoped. It wasn't clear Wednesday afternoon whether stocks would resume their slide, or go up on the next strong earnings report.
"You have a classic tug of war — profits for the second quarter are quite good," Battipaglia said. "On the other hand, you have a growing list of data points that the show stimulus is not leading to a private sector recovery."
Intel rose 35 cents, or 1.7 percent, to $21.36. J.C. Penney fell 20 cents to $22.99, while Macy's dropped 9 cents to $18.38. Target fell 24 cents to $49.65.
The Russell 2000 index of smaller companies fell 2.66, or 0.4 percent, to 640.16.
Overseas, Britain's FTSE 100 fell 0.33 percent, Germany's DAX index rose 0.3 percent, and France's CAC-40 fell 0.1 percent. Japan's Nikkei stock average jumped 2.7 percent.