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Rate Fears Subdue Stocks

Blue chips close with losses, while tech shares are just above the flatline.

Updated from 4:07 p.m. EDT

Stocks closed mixed Monday as a strong manufacturing report appeared to raise worries that the

Federal Reserve

now has more reason to continue its rate-hiking campaign to help keep inflation under control.


Dow Jones Industrial Average

closed down 33.22 points, or 0.31%, to 10,535.48, while the

S&P 500

lost 2.11 points, or 0.17%, at 1226.70. The


gained 3.74 points, or 0.17%, to 2155.43. The 10-year Treasury was down 16/32 in price to yield 4.39%, while the dollar rose against the yen and euro.

"It was certainly a day focusing on inflationary data," said Art Hogan, chief market analyst with Jefferies. "My guess is that we'll have more shifting to corporate news. We have a full shift now that the fourth quarter is starting to search for catalysts."

About 1.55 billion shares traded on the

New York Stock Exchange

, with advancers beating decliners by a 6-to-5 margin. Trading volume on the Nasdaq was 1.83 billion shares, with advancers outpacing decliners 8 to 7.

"This is a market that has made new four-year highs several times this year, but only marginally," said Ken Tower, chief market strategist with CyberTrader. "We're still in an uptrend, but it's very shallow overall."

Crude oil for November delivery finished down 77 cents to $65.47 a barrel, and unleaded gasoline futures lost 3 cents to $2.06 a gallon. Front-month crude is up about 1.1% since last Tuesday's close, as heating oil and natural gas contracts have rallied.

Monday began the last quarter of 2005 with the Institute for Supply Management's manufacturing index for September, which unexpectedly rose to 59.4 from 53.6 in August. Economists expected the ISM index to fall to 52.0.

"This is astonishing," said Ian Shepherdson, chief economist with High Frequency Economics. "Other surveys had suggested companies were dealing with the shock of Katrina and its attendant surge in energy prices better than consumers. One month does not prove anything, but the trend in the headline index has been strengthening since the middle of the year."

Stocks posted a strong third quarter despite terror attacks in London and the effects of hurricanes Katrina and Rita in the U.S. For the third quarter, the Dow gained 2.9%, the S&P rose 3.2%, and the Nasdaq added 4.6%.

Separately, the Census Bureau said that construction spending rose 0.4% August, matching economists' expectations.

Over the course of the session, U.S. automakers released auto- and truck-sales figures for September. The sales data came after a report in

The New York Times

that said the U.S. government has calculated that

General Motors'

(GM) - Get Free Report

pension fund deficit is $31 billion, though the company has said it's fully funded.

GM posted a decline for September, with sales falling 24% to 349,202 vehicles. Car sales were down 14.5%, while truck sales dropped 29.5%. GM rose 43 cents, or 1.4%, to $31.04.


(F) - Get Free Report

also reported a 19% decline in U.S. sales to 228,157 vehicles, as consumers made the move away from SUVs. Still, Ford shares were up 3 cents, or 0.3%, to $9.89.




reported a 4% rise in sales for September to 193,108 vehicles. That sent the stock up 44 cents, or 0.8%, to close at $53.56.

A number of mergers were in the headlines.

NRG Energy

(NRG) - Get Free Report

said it will purchase privately held Texas Genco for $4 billion in cash and $1.8 billion in stock. NRG will also assume $2.5 billion in debt. Shares of NRG added $5.95, or 14%, to $48.55.



(SYMC) - Get Free Report

said it will acquire information technology company



for $209 million, or $4 a share, in cash. Symantec rose 16 cents, or 0.7%, to $22.82, while BindView jumped 36 cents, or 10.3%, to $3.86.


R.H. Donnelley


will acquire

Dex Media

(DEX) - Get Free Report

in a deal worth $4.2 billion in cash and stock. Donnelley will assume $5.3 billion in debt as well. Donnelley fell $1.49, or 2.4%, to $61.77. Dex was also lower, down 97 cents, or 3.5%, to $26.82.

Also among companies, homebuilder


(LEN) - Get Free Report

finished up 3.3% on news it will be added to the S&P 500 at the close of trading Monday, replacing


. Lennar added $1.95 to $61.70.



(GOOG) - Get Free Report

rose despite being passed over in favor of Lennar. After opening lower, Google turned positive on word that it's planning a collaboration with

Sun Microsystems

(SUNW) - Get Free Report

. Google recently was higher by $2.22, or 0.7%, to close at $318.68.


(WMT) - Get Free Report

finished lower after the company said it expects September same-store sales to rise 3.8%, in the upper end of its previous forecast range of 2% to 4%. The stock lost 6 cents, or 0.1%, to $43.76.

Hoku Scientific


jumped 15.1% on news that the U.S. Navy has exercised two fuel-cell contract options worth $2.5 million. Hoku was up $1.62 to finish at $12.32.

In ratings moves, J.P. Morgan upgraded

Lexar Media


to overweight from neutral after the company's deal with



, shrinking the risk of bankruptcy for the company. Lexar surged 18%, up $1.15 to $7.53.




was lower by 3.2% after Roth Capital Partners downgraded the stock to neutral from buy, citing valuation.

The move comes a week after shareholders approved a reverse stock split. Separately, the company reported in a regulatory filing that it has a material weakness in its internal financial reporting controls. Shares lost 7 cents to $2.15.

Overseas markets were mixed, with London's FTSE 100 up 0.4% at 5501 and Germany's Xetra DAX adding 0.8% to 5082. In Asia, Japan's Nikkei fell 0.4% overnight to 13,525, while Hong Kong's Hang Seng was down 0.2% at 15,394.