By Caroline Valetkevitch
NEW YORK (Reuters) - The Dow and the S&P 500 eked out record closing highs again on Tuesday, while the Nasdaq resumed its recent slide, dragged down by shares of Cisco .
The S&P 500 briefly rose above 1,900 for the first time early in the session, but quickly gave back some of its gains. In contrast, the Russell 2000 <.TOY> index of small-cap stocks fell 1.1 percent.
"We didn't see much of a follow-through from yesterday's run-up. That started a discussion as to whether the economy was going to bounce back as strongly as some folks had been expecting," said Bucky Hellwig, senior vice president of BB&T Wealth Management in Birmingham, Alabama.
"We've eked out a gain in the broad averages but continue to see weakness in the Nasdaq and small caps so that divergence has got some investors concerned. What you see is a smaller group of stocks participating in the rally."
Homebuilders' shares gained and the common stock of mortgage finance giants Fannie Mae and Freddie Mac jumped as Federal Housing Finance Agency Director Mel Watt laid out new policies that could make it easier for many Americans to obtain mortgages. Fannie Mae jumped 7.8 percent to $4.57 while Freddie Mac advanced 6.9 percent to $4.49.
Cisco Systems Inc , set to report results on Wednesday, was the biggest drag on the Nasdaq. The stock slid 1.4 percent to end at $22.86.
The Dow Jones industrial average <.DJI> rose 19.97 points or 0.12 percent, to 16,715.44, its third straight record closing high. The Dow also set an intraday record at 16,735.51.
The S&P 500 <.SPX> gained just 0.8 of a point or 0.04 percent, to 1,897.45, its second straight record closing high. The S&P 500 also advanced during the session to 1,902.17, a lifetime intraday high.
The Nasdaq Composite <.IXIC> dropped 13.69 points or 0.33 percent, to 4,130.165.
The drop in the Russell 2000 came a day after the index scored its biggest daily percentage gain since early March. At its session low on Friday, the index was down exactly 10 percent from the intraday record high set in early March.
The Dow Jones Transportation Average <.DJT> rose 0.5 percent after hitting another intraday record high, which some analysts say points to upbeat prospects for the U.S. economy.
More developments on the deal front enhanced the outlook for stocks. Keurig Green Mountain Inc was the S&P 500's biggest percentage gainer, up 7.6 percent at $119.07. The stock climbed after Coca-Cola Co said it will raise its stake in the company, the maker of the popular Keurig one-cup coffee brewer, to 16 percent from 10 percent.
In other deal news, DirecTV shares slipped 1.2 percent to $86.08 a day after sources told Reuters that AT&T Inc was in active talks to buy the company in a deal that could be worth close to $50 billion. AT&T's stock dropped 1 percent to $36.20 and was the biggest drag on the S&P 500.
Among homebuilders, the stock of D.R. Horton Inc rose 2.2 percent to $23.07. The PHLX housing sector index <.HGX> gained 0.2 percent.
Data did little to change the view that the U.S. economy is poised for faster growth this quarter. Retail sales rose 0.1 percent in April, less than expected, though the March reading was revised upward.
About 5.5 billion shares changed hands on U.S. exchanges, below the 6.1 billion average for the month to date, according to data from BATS Global Markets.
(Editing by Bernadette Baum, Nick Zieminski and Jan Paschal)