U.S. Stocks Tentative; Blue Chips Fall Into Negative Turf

NEW YORK (MarketWatch) -- U.S. stocks churned in mixed action Tuesday, with sentiment alternately buoyed by a stronger-than-expected rise in factory orders but darkened by a report that Lehman Brothers Holdings Inc. might have to raise additional capital.

"Without strength in financials, I don't see a rally going anywhere," said Peter Boockvar, equity strategist at Miller Tabak.

The major indexes registered a muted reaction to Federal Reserve chief Ben Bernanke's first speech on the economy in two months, in which he signaled discomfort with the weak U.S. dollar. .

The dollar bounced firmly higher. .

"It had a big impact on the currencies markets, because he [Bernanke] spoke more about the dollar than in all of his previous speeches combined," said Peter Boockvar, equity strategist at Miller Tabak.

"It's enough to acknowledge that the weakness in the dollar is part of inflation, he doesn't want to tell the American people that he's why they are paying higher food and energy prices," said Boockvar of Bernanke and the central bank's monetary policies.

After climbing modestly higher earlier, the Dow Jones Industrial Average fell 17.71 points to 12,486.31.

One Dow component on the rise was General Motors Corp. , extending gains after standing out as one of the few blue chips to move higher during Monday's steep decline.

GM's shares were recently ahead 1% after Chief Executive Rick Wagoner detailed plans to shift the automaker's focus more toward cars and crossovers by closing four truck plants. .

Also among the Dow stocks, Wal-Mart Stores Inc. gained 1.1% after the world's largest retailer drew an upgrade to outperform from Morgan Keegan analyst John Lawrence.

Boeing Co. fronted blue-chip decliners, its stock down 3.3%, followed by shares of McDonald's Corp. , off 1.7%.

Sectors part ways

Meanwhile, the S&P 500 Index climbed 2.35 points to 1,388.02, with energy pacing gains among the index's 10 industry groups, up 1.1%. Information technology and health care followed, with the former up 0.6% and latter advancing 0.5%.

Five S&P sectors lost ground, with the declines fronted by consumer staples, off 0.4%, and telecommunication services, down 0.3%.

"People are selling financials and buying technology. It's kind of bizarre. People are buying into this belief in technology in the face of a still-challenging business environment for a lot of them, considering their biggest customers are banks," said Boockvar.

The Nasdaq Composite Index climbed 8.07 points to 2,499.6.

Volume neared 573 million shares on the New York Stock Exchange, with advancers topping decliners roughly 8 to 7. On the Nasdaq, 408 million shares changed hands, as advancing stocks outpaced those declining 7 to 6.

Shares of Lehman fell 1.5% in the wake of a Wall Street Journal report that the investment firm faces its first quarterly loss since going public in 1994, and also may be compelled to sell up to $4 billion in common stock to raise capital. .

Helping offset the developments at Lehman, Toll Brothers Inc. reported a smaller second-quarter loss than forecast.

Shares of the luxury home builder added more than 4.4% in recent action.

On Monday, U.S. equities ended sharply lower, breaking a four-session win streak, with the Dow industrials falling by triple digits after Standard & Poor's cut its ratings on three large brokerages.

In Tuesday's commodities action, crude futures fell $2.16 to $125.60 a barrel, while gold futures dropped $10.10 to $882.80 an ounce.

Regular-unleaded gasoline prices held steady at the record price of $3.98 a gallon, according to the Daily Fuel Gauge Report by AAA.

On the economic data front, the Commerce Department reported orders for U.S.-made factory goods climbed 1.1% in April, with the results proving better than anticipated.

By Kate Gibson