WALL Street stocks turned lower yesterday as a tame report on new housing construction failed to inspire investors about the prospects for steady inflation and interest rates.

The Dow Jones industrial average fell 26.97 points to close at 5,625.81. The blue chip barometer, which held a slight gain until mid afternoon, again traded in the narrow range that has charactcrised the indecisive mood of the past week.

Investors have been frustrated by a series of conflicting signals on inflation, with most fearing recent indications of rising employment and wage levels, which could translate into too much consumer demand that will push up prices.

Many analysts expect the Federal Reserve, the US central bank, to raise interest rates in early July to slow borrowing and spending.

Declines outnumbered advances by a margin of almost seven to six on the NYSE.