Stocks pull off highs following drop in home sales; Bernanke sounds confident note on economy

Stocks pare gains on surprise drop in home sales

NEW YORK — Stocks are giving back some of their gains following news that sales of existing homes fell unexpectedly last month.

The National Association of Realtors’ report Tuesday that home sales fell 2.2 percent in May is a surprise to analysts who thought deals would get a lift from a homebuyer tax credit.

Sales fell to a seasonally adjusted annual rate of 5.66 million from a revised 5.79 million in April.

Stocks have been trading in a tight range after the market gave up big gains Monday to end lower.

The Dow Jones industrial average is up 7 at 10,450. It was up 24 ahead of the home sales report. The Standard & Poor’s 500 index is up 1 at 1,114, while the Nasdaq composite index is up 10 at 2,300.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

NEW YORK (AP) — Fresh concerns about Europe’s sovereign debt crisis are keeping the stock market in check Tuesday.

Stocks are trading in a narrow range after Fitch Ratings cut its view on a major European bank and ahead of the start of the Federal Reserve’s two-day rate-setting committee meeting.

Fitch Ratings slashed its view on BNP Paribas SA, the eurozone’s largest bank by deposits. That has renewed worries that plagued global markets in recent months. Traders are concerned that mounting sovereign debt across Europe, particularly in Greece, Spain and Portugal, would disrupt a global economic recovery and lead to a fresh round of losses for banks holding that government’s debt. Banks around the globe were hammered with losses during the credit crisis in late 2008.

If caution grows among banks because of worries about sovereign debt, that could slow lending to companies and consumers during a time when access to credit is already tight.

The euro, used by 16 countries in Europe, resumed its fall against the dollar after rising for eight of the past 10 days. The euro fell to $1.2298.

The tight trading range and drop in euro come as the U.S. Federal Reserve opens a two-day meeting where it is expected to keep a key interest rate at historic lows. That move is intended to stimulate growth as a domestic recovery moves slowly.

High unemployment and weakness in the housing market have been two reasons a rebound has been slow and unsteady, though it has allowed the Fed to keep rates low. A new report due out Tuesday is expected to show sales of previously occupied homes rose in May, though sales could fall in the coming months now that a home buyer tax credit has expired.

The National Association of Realtors is expected to say existing home sales rose 6.1 percent in May to a seasonally adjusted annual rate of 6.12 million, up from 5.77 million in April, according to economists polled by Thomson Reuters.

The Dow Jones industrial average rose 19.80, or 0.2 percent, to 10,462.21. The Standard & Poor’s 500 index rose 1.63, or 0.2 percent, to 1,114.83, while the Nasdaq composite index rose 12.90, or 0.6 percent, to 2,301.99.