U.S. MARKET AVERAGES

After the initial rise, stocks moved to the negative territory as an upbeat reading on the economy and strong earnings raised concerns about additional Fed Reserve interest rate hikes.

The selloff began after the Conference Board said its Index of Leading Economic Indicators rose sharply in January by 1.1%, almost twice as high as economists expected, following a 0.3% increase in December.

In earnings news, Federated Department Stores reported Q4 net income rose 59% from last year, aided by the acquisition of former rival May Department Stores Co. The department store operator also backed its full-year financial forecast.

Home Depot (HD: chart), home-improvement retailer, reported that Q4 net earnings rose 23% on strong sales in installations. The company posted 16% revenue growth and 5.5% same-store sales increase.

Less stellar results from the world's top retailer Wal-Mart Stores Inc. (WMT: chart) additionally dimmed market's mood. The retailer announced a 13.4% increase in net income for Q4 due to strong demand for laptop computers and gift cards, beating analysts' expectations. Wal-Mart Stores revealed net income of $2.68 per share for fiscal 2006, above the average analyst consensus of $2.62. The company provided 2007 earnings guidance that fell short of estimate.

Dow components Merck (MRK: chart), Boeing (BA: chart) and Caterpillar (CAT: chart) edged higher on Tuesday to set new 52-week highs. Ciena (CIEN: chart) and BellSouth (BLS: chart) were other noteworthy stocks setting new peaks.

There were few notable stocks moving to new 52-week lows. Centennial Communications (CYCL: chart) dropped below a recent range to reach a new low on earnings news. PDI (PDII: chart) added to its recent weakness to set a fresh low.

In midday trading, the Dow Jones industrial average fell 45.14, or 0.41%. The Standard & Poor''s 500 index fell 4.76, or 0.37%, and the Nasdaq composite index fell 20.87, or 0.91%.

Bonds were lower, with the yield on the 10-year Treasury note at 4.56%, up from 4.54% late Friday.

MOVERS AND SHAKERS

Evergreen Solar (ESLR: chart) received a $100 million four-year supply deal with Germany''s S.A.G. Solarstrom AG. Evergreen will ship about $100 million of photovoltaic modules to S.A.G., which operates solar power stations. The stock jumped 6.7%.

MeriStar Hospitality (MHX: chart) agreed to be acquired by an affiliate of the private equity firm Blackstone Group for about $2.6 billion. Under the terms of the deal each share of MeriStar common stock and each unit of limited partnership interest in MeriStar''s operating partnership, will be converted into the right to receive $10.45 in cash. The deal is expected to close in Q2 of 2006. The company’s shares gained 3.7%.

Atari Inc (ATAR: chart) said it will cut 20% of its workforce worldwide as part of a previously announced plan to cut costs and dispose of non-core assets, among other actions. The company’s shares gained 4%.

Haverty Furniture (HVT: chart), home furnishings retailer, posted Q4 profit drop of $6.8 million, or 30 cents a share from $8.7 million, or $38 cents a year ago, missing estimates of 31 cents. The company said profit was hurt by higher energy and transportation costs. Sales for the quarter rose to $225.6 million from $216.8 million in last year''s fourth quarter. The stock dropped 6%.

ECONOMIC NEWS

The Conference Board released its report on leading economic indicators in the month of January on Tuesday. The report showed that the agency''s index of leading indicators rose much more than economists had anticipated.

The report showed that the index surged up by 1.1 percent in January after an upwardly revised increase of 0.3 percent in December. Economists had expected a more modest increase of 0.6 percent compared to the 0.1 percent increase originally reported for December.

The Conference Board said that the increase by the index in January was largely due to a decrease in initial jobless claims and increases in real money supply and building permits.

The report also showed that the coincident index, a measure of current economic activity, increased by 0.2 percent in January.

The Conference Board noted that the coincident index has been on a relatively steady upward trend since April 2003, although it pointed out that this trend moderated somewhat in the second half of 2005.