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Markets trade flat ahead of Fed action

The Dow hasn't roared like this since 1927.

NEW YORK - Wall Street battled back from sharp losses yesterday to close mostly flat as investors sought buying opportunities and adjusted their holdings ahead of the Federal Reserve's meeting on interest rates.

Stocks were down for most of the session on concerns about what central bankers might say about the economy. However, the drop - the first for the Dow Jones industrials in six sessions - did make some prices look more attractive ahead of today's meeting.

Data released yesterday showed the economy continues to sputter. The Commerce Department reported wholesalers' inventories grew at a slower rate in March, failing to meet projections. Meanwhile, the National Association of Realtors lowered its forecast for the housing market this year because of stricter lending standards and subprime woes.

Economic reports are expected to wield more influence on the direction of stocks as earnings announcements slow. The latest data did little to change expectations that policymakers will leave rates unchanged, though Wall Street will really be looking for further direction about whether a hoped-for rate cut is in the offing.

"There's this wait-and-see pullback with regard to what the Fed might do on Wednesday," said Janna Sampson, a portfolio manager for Oakbrook Investments L.L.C. "Given the run we've had, and a pretty strong start of the year, this might be a case of investors' positioning their portfolios a little sooner than usual before the summer doldrums."

The Dow Jones industrial average fell 3.90, or 0.03 percent, to 13,309.07. The blue-chip average had been up 24 of the last 27 sessions and surpassed the 13,300 mark Monday for the first time.

Broader stock indicators were narrowly mixed. The Standard & Poor's 500 index was down 1.76, or 0.12 percent, at 1,507.72, and the Nasdaq composite index rose 0.80, or 0.03 percent, to 2,571.75.

Fixed-income investors placed optimistic bets ahead of the Fed meeting, sending bonds higher. The yield of the benchmark 10-year Treasury note fell to 4.63 percent from 4.64 percent late Monday.

Oil prices advanced amid fears of supply disruptions after the bombing of three major oil pipelines by militants in Nigeria. A barrel of light, sweet crude rose 79 cents to close at $62.26 on the New York Mercantile Exchange.

This lifted major oil companies. Exxon Mobil Corp. rose 55 cents, to $81.38. Chevron Corp. picked up 47 cents, to $80.05, while ConocoPhillips fell 9 cents to close at $70.25.

Though most analysts expect stocks will continue to advance, there are rising expectations on Wall Street that a correction will be needed to sustain the bull run. Before yesterday's breather, the S&P 500 was moving toward its all-time high of 1,527.46, reached on March 24, 2000, at the height of the dot-com boom; the Dow's recent run has been its best showing since 1927.

"If we keep marching up without a break, we will set ourselves up for another sell-off," said Alan Brown, head of investment for Schroder Investment Management Ltd. "But the fundamentals still look pretty encouraging to me provided of course that the U.S. slowdown does not turn into something much worse."