Economic data offered little incentive to push stocks higher. The Institute for Supply Management, an organization of corporate purchasing executives, reported that the nation's service economy expanded at a slower pace in March than in February.

But the market held on to gains earned Tuesday when the Dow Jones industrials and Standard & Poor's 500, riding some optimism about the housing market, rose to their highest levels since a global pullback Feb. 27.

"The data has been somewhat mixed. People are still trying to get a grasp on — as the Fed interprets this data — what is it going to do next," said Nick Raich director of research at National City Private Client Group, referring to the Federal Reserve's next move on short-term interest rates.

He said Wall Street's widely held belief earlier in the year that the economy was headed toward a soft landing had been eroded by concerns about the housing market and the well-documented woes of subprime mortgage lenders. Better-than-expected housing news Tuesday fed the advance that lifted the Dow 128 points.

GAINS MADE FOR MAJOR INDEXES

The Dow rose 19.75, or 0.16 percent, to 12,530.05.

Broader stock indicators made modest gains. The Standard & Poor's 500 index rose 1.60, or 0.11 percent, to 1,439.37, and the Nasdaq composite index rose 8.36, or 0.34 percent, to 2,458.69.

Bonds rose as investors looked past mixed economic data for the security of Treasuries. The yield on the benchmark 10-year Treasury note fell to 4.65 percent from 4.67 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude settled down 26 cents to $64.38 on the New York Mercantile Exchange. Oil prices, which had risen since the dispute over Iran's capture of 15 British sailors and marines unfolded March 23, moved lower but pared some of their losses after release of inventory data. Weekly Energy Department figures showed a greater-than-expected draw last week of gasoline supplies.

MIXED SIGNAL FROM ECONOMIC NEWS

Economic news, which has kept Wall Street's attention in recent months, gave mixed signals Wednesday. Investors have been trying to determine whether the economy can still slow gradually — a so-called soft landing — or whether fissures in the housing sector will place too great a strain on economic growth. Recent attention to strains among so-called subprime lenders, which make loans to people with somewhat dubious credit quality, has unnerved some investors.

The Fed, which has left interest rates unchanged at its last six meetings after a string of 17 straight increases, has said inflation remains a concern even as the economy slows.

"As long as growth continues to run along below the speed limit, that should ease some inflation concern," said Craig Wright, chief economist at RBC Financial Group, referring to growth below levels that might make the Fed nervous.

"The economic data is a good proxy for what we're seeing overall — that growth is moderating. Growth is shifting to a slower speed and it's taking place as inflation is drifting slightly higher," Wright said.

The ISM report showed the group's index of business activity in the non-manufacturing sector came in at 52.4 in March, down from 54.3 in February. Wall Street had been expecting a reading of 54.7. Figures above 50 indicate expansion. March was the 48th straight month of growth in the non-manufacturing industries.

Also, new orders placed with U.S. factories for manufactured goods rose by 1 percent in February; economists had been expecting an increase of 1.9 percent.

Investors appeared unimpressed with a report from payroll services company Automatic Data Processing Inc. and consultancy Macroeconomic Advisers reported that predicts an increase of 106,000 private jobs in March. That came in below economists' expectations for an increase of 150,000 jobs.

CORPORATE NEWS

In corporate news, Best Buy Co. fell $1.24, or 2.5 percent, to $47.89 after reporting its fiscal fourth-quarter profit rose nearly 19 percent.

Rival Circuit City Stores Inc. posted an unexpected loss because of sluggish sales growth — especially in its flat-panel televisions. Circuit City, the No. 2 electronics chain behind Best Buy, fell 7 cents to $18.21.

Psivida Ltd., an Australian developer of bio-nanotech technology, jumped 21 cents, or 10.3 percent, to $2.25 after signing an exclusive research and license agreement for its drug delivery technology with Pfizer Inc. Pfizer rose 14 cents to $25.81.

Monsanto Co. rose $1.79, or 3.2 percent, to $57.79 after the world's largest seed company said demand for corn-based ethanol led to strong corn seed sales and boosted fiscal second-quarter profits by 23 percent.

Advancing issues outpaced decliners by about 6 to 5 on the New York Stock Exchange, where volume came to 1.4 billion shares compared with 1.56 billion shares traded Tuesday.

The Russell 2000 index of smaller companies slipped 0.98, or 0.12 percent, to 810.79.

Japan's Nikkei stock average closed up 1.74 percent. Hong Kong's Hang Seng index advanced 1.03 percent, while the sometimes-volatile Shanghai Composite Index added 0.01 percent. Britain's FTSE 100 closed down 0.02 percent, Germany's DAX index rose 0.40 percent, and France's CAC-40 finished up 0.47 percent.

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