Wall Street churns for third day after rally

MARKETS-USA-STOCKS:Wall Street churns for third day after rally

Wall Street churned for a third day on Wednesday as positive trends in the housing market offset a cautious outlook from 3M Co but were not enough to drive stocks further after the recent central bank-inspired rally.

Industrial conglomerate 3M Co was the latest major U.S. company after FedEx to caution about the economy. 3M said the "economic environment has changed" since the company adopted its long-term 7-8 pct revenue growth target, and it now views that range as a "stretch target". The shares dropped 0.2 percent after falling more than 1 percent premarket.

U.S. housing starts rose less than expected in August as groundbreaking on multifamily home projects fell, but the trend continued to point to a turnaround in the housing market. The report comes as investors look for improving economic data to help bolster a 7 percent rally since early August that was largely driven by action from central banks.

"The market is holding up here at highs and that's probably what we're going to do this week," said Frank Lesh, a futures analyst and broker at FuturePath Trading LLC in Chicago. "I don't see any big selloff coming, just some range trading and some consolidation."

But Lesh said the mood was still one of caution: "We are all looking over our shoulder," he said. "What about Europe? What about the economy? Any bad news could take us off."

The Dow Jones industrial average gained 10.88 points, or 0.08 percent, to 13,575.52. The Standard & Poor's 500 Index gained 0.53 point, or 0.04 percent, to 1,459.85. The Nasdaq Composite Index dropped 3.21 points, or 0.10 percent, to 3,174.59.

"When you look at the weeks that preceded this, we really had massive moves on a back-to-back basis and it's not unusual to see this type of consolidation where we trade sideways for a few days, at least until we get a new catalyst," said Art Hogan, managing director of Lazard Capital Markets in New York.

Both 3M and FedEx are viewed as economic bellwethers because they are involved with so many sectors of the economy. Their warnings come as S&P 500 companies are expected to post a 2 percent contraction in third quarter earnings.

As of Friday, there were 88 negative earnings preannouncements issued by S&P 500 corporations compared to 21 positive announcements. The ratio is the weakest showing since the third quarter of 2001, according to Thomson Reuters data.

The recent surge in stock prices has led to an increase in bullish sentiment among U.S. investors. The proportion of equity bulls climbed to 54.2 percent from 51.1 percent a week ago and posted its third straight reading above 50, according to a weekly survey by Investors Intelligence. Some investors see high levels of enthusiasm as a warning that prices may be topping.

General Mills Inc reported higher quarterly earnings on Wednesday, helped by recent acquisitions, and stood by its full-year outlook. The shares rose 1.3 percent to $39.80.

Japan's Nikkei share average hit a four-month closing high on Wednesday after Tokyo's central bank eased monetary policy to bolster an economy struggling with sluggish global demand and fallout from a territorial dispute with China.