Stocks Close Modestly Higher Despite Weak Housing Data

The stock market bounced back from an early decline on Tuesday to close modestly higher as investors shrugged off weaker-than-expected housing data and the continuing violence in Iraq, and as the Federal Reserve began a two-day policy meeting.

The Dow Jones industrial average rose 27.48 points, or 0.16 percent, to end at 16,808.49, according to preliminary figures. The Standard & Poor's 500-stock index gained 4.21 points, or 0.22 percent, to 1,941.99. The Nasdaq composite index added 16.13 points, or 0.37 percent, to 4,337.23.

Housing starts and building permits fell more than expected in May, as groundbreaking for homes dropped 6.5 percent to a seasonally adjusted annual pace of 1 million units.

But the Consumer Price Index increased 0.4 percent last month, pointing to a steady firming of inflation pressures, which should ease concerns of some Fed officials that inflation was running too low. The C.P.I. data bolstered yields on the 10-year Treasury note as high as 2.65 percent, which helped lift financial stocks 0.9 percent as the best-performing S.&P. sector.

Iraq's Shiite rulers defied Western calls to reach out to Sunnis to defuse an uprising in the north of the country, declaring a boycott of Iraq's main Sunni political bloc and accusing Sunni power Saudi Arabia of promoting "genocide."

Investors have been monitoring the crisis unfold in Iraq, worried that it could lead to sharply higher oil prices. On Tuesday, crude prices slipped 0.7 percent to $106.19 a barrel, following a jump of more than 4 percent last week.

"The Iraq situation could continue to destabilize markets, and there are a lot of unknown factors that could keep oil prices elevated," said Bernard Baumohl, a managing director at the Economic Outlook Group. "That said, valuations for stocks are not alarmingly high, and there aren't many alternatives for investors."

The Fed is widely expected to conclude its meeting on Wednesday with another $10 billion reduction of its monthly bond purchases. Not much else is expected in the way of major monetary policy moves, putting the focus on whether officials will tip their hand on longer-term plans for interest rates.

Among the stocks on the move, Yingli Green Energy climbed 12.2 percent after the Chinese solar panel maker reported a smaller first-quarter loss, citing cost controls and a small rise in panel prices.

The American-listed shares of GW Pharmaceuticals jumped 16.3 percent after the British company said its experimental cannabis product Epidiolex showed promising results in children and young adults with treatment-resistant epilepsy.

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