Bond prices rose sharply as investors brushed off the economic reports and went on a buying spree.

Economic data offered little incentive to push stocks higher. The Institute for Supply Management, an organization of corporate purchasing executives, reported that the nation's service economy expanded at a slower pace in March than in February.

But the market held on to gains earned Tuesday when the Dow Jones industrials and Standard & Poor's 500, riding some optimism about the housing market, rose to their highest levels since a global pullback Feb. 27.

The data has been somewhat mixed. People are still trying to get a grasp on - as the Fed interprets this data - what is it going to do next," said Nick Raich director of research at National City Private Client Group, referring to the Federal Reserve's next move on short-term interest rates.

He said Wall Street's widely held belief earlier in the year that the economy was headed toward a soft landing had been eroded by concerns about the housing market and the well-documented woes of subprime mortgage lenders. Better-than-expected housing news Tuesday fed the advance that lifted the Dow 128 points.

In early afternoon trading Wednesday, the Dow rose 10.65, or 0.09 percent, to 12,520.95.

Broader stock indicators turned narrowly mixed. The Standard & Poor's 500 index slipped 0.07, or less than 0.01 percent, to 1,437.70, and the Nasdaq composite index rose 6.22, or 0.25 percent, to 2,456.55.

Bonds rose sharply as investors looked past mixed economic data for the security of Treasuries. The yield on the benchmark 10-year Treasury note fell to 4.64 percent from 4.67 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell 29 cents to $64.35 on the New York Mercantile Exchange. Oil prices, which had risen since the dispute over Iran's capture of 15 British sailors and marines unfolded March 23, moved lower but pared some of their losses after release of inventory data. Weekly Energy Department figures showed a greater-than-expected draw last week of gasoline supplies.

Economic news, which has kept Wall Street's attention in recent months, gave mixed signals Wednesday. Investors have been trying to determine whether the economy can still slow gradually - a so-called soft landing - or whether fissures in the housing sector will place too great a strain on economic growth. Recent attention to strains among so-called subprime lenders, which make loans to people with somewhat dubious credit quality, has unnerved some investors.

The Fed, which has left interest rates unchanged at its last six meetings after a string of 17 straight increases, has said inflation remains a concern even as the economy slows.

The ISM report showed the group's index of business activity in the non-manufacturing sector came in at 52.4 in March, down from 54.3 in February. Wall Street had been expecting a reading of 54.7. Figures above 50 indicate expansion. March was the 48th straight month of growth in the non-manufacturing industries.

Also, new orders placed with U.S. factories for manufactured goods rose by 1 percent in February; economists had been expecting an increase of 1.9 percent.

Investors appeared unimpressed with a report from payroll services company Automatic Data Processing Inc. and consultancy Macroeconomic Advisers reported that predicts an increase of 106,000 private jobs in March. That came in below economists' expectations for an increase of 150,000 jobs.

In corporate news, Best Buy Co. fell 85 cents to $48.28 after reporting its fiscal fourth-quarter profit rose nearly 19 percent.

Rival Circuit City Stores Inc. posted an unexpected loss because of sluggish sales growth - especially in its flat-panel televisions. Circuit City, the No. 2 electronics chain behind Best Buy, fell 28 cents to $18.

In other corporate news, automakers remained in focus as DaimlerChrysler AG Chief Executive Dieter Zetsche said the automaker is in talks with potential buyers for its Chrysler unit. He would not elaborate on who was involved in the talks. DaimlerChrysler fell 80 cents to $82.15.

Psivida Ltd., an Australian developer of bio-nanotech technology, jumped 44 cents, or 21.6 percent, to $2.48 after signing an exclusive research and license agreement for its drug delivery technology with Pfizer Inc. Pfizer rose 8 cents to $25.75.

Greenbrier Cos., which makes freight cars and provides services to railroads, fell $3.90, or 14.6 percent, to $22.82 after it swung to a loss in its fiscal second quarter amid lackluster demand.

Monsanto Co. rose $1.71, or 3.1 percent, to $57.71 after the world's largest seed company said demand for corn-based ethanol led to strong corn seed sales and boosted fiscal second-quarter profits by 23 percent.

Advancing issues outpaced decliners by about 6 to 5 on the New York Stock Exchange, where volume came to 748.1 million shares.

The Russell 2000 index of smaller companies fell 0.94, or 0.12 percent, to 810.83.

Overseas, Japan's Nikkei stock average closed up 1.74 percent. Hong Kong's Hang Seng index advanced 1.03 percent, while the sometimes-volatile Shanghai Composite Index added 0.01 percent. Britain's FTSE 100 closed down 0.02 percent, Germany's DAX index rose 0.40 percent, and France's CAC-40 finished up 0.47 percent.