Wild Ride Ends With a Slide

The markets will be closed for New Year's on Tuesday. Volume was thin ahead of the holiday, with 2.39 billion shares trading on the New York Stock Exchange and 1.40 billion changing hands on the Nasdaq. Decliners led advancers by roughly 9 to 7 on both venues.

The lone report on the economic docket came from the National Association of Realtors, which said existing-home sales rose 0.4% to an annualized rate of 5 million units last month, as expected. Still, sales were down 20% from a year ago.

The inventory of homes on the market fell 3.6% last month to a 10.3-month supply.

After initially falling in the wake of the housing data, the Philadelphia Housing Sector Index rallied 1.5%, paced by gains in Beazer Homes (BZH Quote) and Hovnanian (HOV Quote).

U.S. Treasury prices were rising after the home sales report. The 10-year note rose 13/32 in price, yielding 4.03%. The 30-year bond added 24/32 in price to yield 4.45%.

Among corporate news, Legg Mason (LM Quote) said late Friday it has decreased its exposure to structured investment vehicles, or SIVs, by half to 3.2% of its total liquid assets. The firm is expected to take a hit to its third-quarter earnings of $22.2 million, or 15 cents a share. Legg Mason rose $1.90, or 2.7%, to $73.15.

Elsewhere in financials, Merrill Lynch (MER Quote) is in talks with Chinese and Middle Eastern sovereign wealth funds to sell another piece of the bank, according to a report in The Observer. After opening lower, shares of Merrill finished up 71 cents, or 1.3%, at $53.68.