Stocks Start Week With Mixed Finish

The Dow forfeits early gains and closes lower, showing signs of fatigue after rallying more than 4% so far in December. Gregg Greenberg has The Real Story.
By Shanthi Bharatwaj ,

NEW YORK (

TheStreet

) -- Stocks closed mixed on Monday, showing signs of running out of steam after recent gains in the first session of a holiday-shortened trading week.

The

Dow Jones Industrial Average

traded in a narrow range of roughly 80 points, closing down by 14 points, or 0.1%, at 11,478. The benchmark index began the day on a positive note, hitting its session-high of 11,517 shortly after the open, but then dipped as low as 11,442 as trading wore on. The Dow is up about 10% year-to-date, with more than 4% of that gain coming in December alone.

The

S&P 500

closed 3 points higher, or 0.3%, at 1,247, while the

Nasdaq Composite

added 7 points, or 0.3%, to finish at 2,650.

On Friday President Barack Obama signed the $858 billion tax bill into law, extending tax cuts enacted under the Bush administration for two years and jobless benefits for millions of Americans through 2011. The bill is expected to stimulate jobs and consumer spending, with economists already upping growth estimates for 2011.

But optimism about the bill faded quickly Monday amid fresh concerns about the escalating Korean conflict after South Korea test-fired artillery despite threats of retaliation from North Korea.

The

February gold contract jumped $5.20 at $1384.4 an ounce, rising for a second consecutive session on its safe-haven appeal, though a stronger dollar was capping gains.

Alcoa

(AA) - Get Report

,

3M

(MMM) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

led percentage gains among the blue chips, while

American Express

(AXP) - Get Report

,

Boeing

(BA) - Get Report

and

Wal-Mart

(WMT) - Get Report

were the Dow's leading laggards.

Stocks in the energy, services, homebuilder and conglomerates sectors attracted buyers while transportation, technology, health care and financial stocks were under pressure. Volume on the New York Stock Exchange settled at around 830 million while roughly 1.71 billion shares changing hands on the Nasdaq. Breadth finished slightly negative on both exchanges with decliners outnumbering advancers 1,534 to 1,482 on the Big Board and 1,383 to 1,273 on the Nasdaq.

"The market is just giving back some gains after we had quadruple witching on Friday," said Marc Pado of Cantor Fitzgerald of the action earlier in the session, referring to the simultaneous expiration of contracts for stock index futures, stock index options, stock options and single stock futures. "And now we have the North Korea conflict," he added.

Members of the European Union failed to expand the current bailout fund at a summit last weekend. The members also did not agree to establish common-area eurobonds that will allow all 16 eurozone members to issue bonds under one umbrella.

Meanwhile, rating agencies are threatening more downgrades. Moody's said last week that it may lower Spain's rating and slashed Ireland's debt by five levels. Costs to insure France's debt rose to a record on Monday.

The euro was off by 0.5% against the dollar at $1.3123. The dollar was trading higher against a basket of currencies, with the dollar index up 0.321%.

Trading is expected to be light this week, shortened by the holidays. Economic reports, including a final estimate of GDP for the third quarter, will be released on Wednesday and Thursday, but market reaction will likely be muted ahead of the Christmas holiday, observed as a market holiday on Friday.

Pado said that we have seen a lot of asset reallocation from bonds into stocks in recent weeks, driving equity prices higher. Investors have probably finished their asset allocation now and are unlikely to make fresh moves in the holiday week. Pado expects material market reaction only under certain conditions, such as M&A or earnings news or more information on the holiday shopping season. "We will know the Christmas returns only next week. Cold weather is driving more people to shop online and not to the mall," he added.

Christmas sales have been strong, with online shopping sales up 12% over the last year according to

Comscore

.

In corporate news, 3M directors prepared for an earlier-than-expected resignation from CEO George Buckley next year. The 65-year-old chief's contract expires in early 2012 but he told 3M he plans to resign next year. 3M shares added 1.1% to close at $87.34.

Akamai Technologies

(AKAM) - Get Report

fell 3.3% to close at $49.17 after the technology company lost a four-year patent battle with

Limelight Networks

(LLNW) - Get Report

concerning web video software. Limelight edged 0.2% lower to finish at $6.24.

Ford Motor

(F) - Get Report

added 0.3% higher to close at $16.85. The U.S. automaker will debut the C-Max next month at the Detroit auto show, returned to the market with a fuel-efficient minivan after exiting the product category four years ago.

American Express

(AXP) - Get Report

slumped 3.4%, closing at $42.50, after Stifel Nicolaus slapped a downgrade on the card services company following concerns that credit card interchange fees may be next to be restricted by the

Federal Reserve

.

Sara Lee

(SLE)

is discussing a potential sale to

JBS

of Brazil, but the deal might hit a bump on disagreements over price, according to latest press reports. Shares rose more than 5% on Friday on news of the talks. The stock closed Monday ahead by 2.5% at $17.69.

Adobe Systems

(ADBE) - Get Report

reported its quarterly results after the closing bell,

topping Wall Street expectations

with an adjusted profit of 56 cents a share compared with an average analyst estimate of 52 cents. The stock jumped as much as in after-hours action after rising 1.4% to close the regular session at $29.18.

Comcast

(CMCSA) - Get Report

shares bid up 2.4% to $21.93 after the company announced plans to offer new programming targeted at African and Asian Americans once it gains majority ownership of

General Electric

's

(GE) - Get Report

NBC Universal.

Shares of

Chesapeake Energy

(CHK) - Get Report

surged 8.8% to close at $25.36 after activist investor Carl Icahn revealed that he had recently upped his stake in the company to over 5%.

Meanwhile, shares of

Boeing

(BA) - Get Report

lost 2.7% at $63.27 even as it said it would boost production of 777 aircrafts to meet global demand. The company has faced delays with its 787 Dreamliner jets.

Shares of

American Eagle Outfitters

(AEO) - Get Report

shed 3% to $14.76 after it was downgraded to neutral by analysts at Susquehanna Financial.

Shares of

Huntington Bancshares

(HBAN) - Get Report

jumped 4.7% to $6.53 after

analysts from Bank of America Merill Lynch upgraded Huntingon with a buy rating .

Homebuilder stocks saw heightened buying interest ahead of key sector reports this week. Shares of

Lennar

(LEN) - Get Report

,

Pulte Group

(PHM) - Get Report

and

D.R. Horton

(DHI) - Get Report

were up 5.3%, 3% and 3.7%, respectively.

In commodity markets, crude oil for February delivery rose 79 cents to trade at $88.70 a barrel as cold weather drove demand for heating.

The benchmark 10-year Treasury note was flat at 0/32, with a yield of 3.338%.

Global stocks finished mixed on Monday. Hong Kong's Hang Seng slipped 0.3%, while Japan's Nikkei shed 0.8%.

In Europe, stocks rose Monday to pre-Lehman Brothers collapse levels despite ongoing concerns about the financial health of countries in the region. The FTSE in U.K. finished up 0.3%, while the DAX in Frankfurt gained 0.5%.

-- Written by Shanthi Bharatwaj and Miriam Marcus Reimer in New York

.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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