Stocks mostly slip as GM gets closer to bankruptcy

Wall Street's rally is going back on hold as General Motors took another step toward bankruptcy court.

Stocks mostly slipped Wednesday after a big advance Tuesday. General Motors Corp. said not enough bondholders agreed to swap their debt for company stock.

That means the automaker is almost definitely headed for bankruptcy protection. GM has until Monday to finish restructuring or file for Chapter 11. The announcement dampened the mood of investors who had grown more optimistic about the economy after Tuesday's positive reading on consumer confidence.

"While consumer confidence looking forward is improving, the reality is the economy is still very weak," said Alan Gayle, senior investment strategist at RidgeWorth Capital Management.

Investors didn't find relief in a bigger-than-expected increase in home sales because a rise in inventories fanned worries that homes languishing on the market would continue to crimp the economy by hurting consumers and banks that hold mortgages.

The National Association of Realtors said sales of previously occupied homes rose from March to April as buyers hunted for bargains. Sales rose 2.9 percent to an annual rate of 4.68 million last month. But the trade group also said the number of unsold homes on the market at the end of April rose almost 9 percent to nearly 4 million. That's a 10-month supply at the current sales pace.

In midmorning trading, the Dow Jones industrial average fell 19.43, or 0.2 percent, to 8,454.06. The broader Standard & Poor's 500 index slipped 0.88, or 0.1 percent, to 909.45, and the Nasdaq composite index rose 7.77, or 0.4 percent, to 1,758.20.

On Tuesday, after an initial dip on worries about North Korea's nuclear testing in Asia, stocks soared on the Conference Board's surprisingly high reading of consumer confidence. The May index was the highest since September. Consumer sentiment does not always correspond to consumer spending, but the data nevertheless fueled investors' hopes for an economic rebound later this year.

The Dow is 29.4 percent above the 12-year low it reached in early March, but still 40.2 percent below the record high it hit in October 2007.

The Russell 2000 index of smaller companies fell 0.77, or 0.2 percent, to 499.54.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 256.8 million shares compared with 294.3 million shares about the same time Tuesday.

Government bonds showed modest moves ahead of an auction of $35 billion in five-year notes that is part of the $101 billion in debt the government is issuing this week. The yield on the benchmark 10-year Treasury note fell, pushing its yield up to 3.57 percent from 3.55 percent late Tuesday.

The dollar rose against other major currencies. Gold prices fell.

Light, sweet crude rose 5 cents to $62.50 per barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average rebounded 1.4 percent. In afternoon trading, Britain's FTSE 100 fell 0.4 percent, Germany's DAX index fell 0.2 percent, and France's CAC-40 rose 0.5 percent.