Stocks Slide Further in Afternoon Slump

The major indices tap new session lows.
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Updated from 12:22 p.m. EST

Stocks in New York sank to new session lows Monday afternoon in a dreary start to the final week of 2008.

The

Dow Jones Industrial Average

shed 119 points to 8396, and the

S&P 500

edged down 12.7 points at 860. The

Nasdaq

was losing 31 points to 1499.

A morning

rally in oil prices

-- attributed to the possibility that Israeli attacks in Gaza could lead to restrictions in regional supply atop signs of compliance with OPEC target cuts -- proved short-lived. Lately, oil was up 29 cents to $38.14 a barrel.

Per oil, we are seeing a bit of a rally off of the lows posted last week, but you have to take it at face value, says Darin Newsom, DTN senior analyst. It's a knee-jerk reaction that's in part end-of-the-year short-covering and possibly some headline-following on its role as a geopolitical hedge, he says.

It doesn't mean that prices won't go back up -- just that the initial round of buying came in as the market reacted to the news, says Newsom. That said, "What we're left with is a fundamental supply and demand situation that is bearish, and if we continue to look at the future spread as an indicator, it still looks like a very bearish as well," he says.

Oil is headed for a nearly 60% loss this year, the biggest annual fall since futures began trading 25 years ago, according to

CNBC.com

.

On Sunday

Kuwait's government

canceled a deal with

Dow Chemical

(DOW) - Get Report

. Kuwait said the $17.4 billion collaboration, K-Dow Petrochemicals, is too risky due to oil prices and the financial crises. Dow said it's working to salvage its proposed $15.3 billion buyout of

Rohm & Haas

(ROH)

, which was to be funded in part by Kuwait's $7.5 billion purchase of Dow Chemical equity.

Both

Dow and Rohm & Haas

were losing ground Monday.

Meanwhile, Venezuelan president Hugo Chavez said Saturday that his government will seize several gold mining concessions previously granted to wealthy private operators. President Chavez said the move should offset decreasing oil prices. Gold was recently rising $6.90 to $878.10 an ounce.

Count wealthy Latin Americans among the big losers to emerge from

Bernard Madoff's alleged Ponzi scheme

, according to a report in

The Wall Street Journal

. Some of the victims were brought in through

Banco Santander

, a Spanish bank that operates in the region, which has admitted losing more than $3.22 billion.

The Fairfield Greenwich Group

, which had a Brazilian presence, was another of numerous avenues of exposure. Its Sentry fund was Madoff's single largest investor with $7.5 billion in the scheme, according to the report.

In domestic news,

GMAC Financial Services

, the auto and mortgage financing arm of

General Motors

(GM) - Get Report

, last week received approval from the

Federal Reserve

to become a bank holding company contingent on completing a

debt-for-equity exchange

by 11:59 p.m. EST Friday. That designation would give the company access to government programs, including Troubled Assets Relief Program, or TARP. However, the company remained tight-lipped through the weekend as to whether it met its thrice extended deadline.

Economic conditions continue to deteriorate globally. The Chartered Institute of Personnel and Development said Monday that as many as 600,000 people could lose their jobs in Britain next year. That would make 2009 the worst year for unemployment since 1991, according to a report on

CNBC

.

In economic data, consumer confidence, initial jobless claims and manufacturing surveys are due out this week. Discouraging

retail figures

emerged ahead of the weekend, as sales lagged this holiday season as expected. They fell between 5.5% and 8% compared with the year prior's holiday season, according to preliminary data from SpendingPulse, a division of MasterCard Advisors.

Beginning next week, the economic calendar will pick up once again, and we'll get a clearer picture of exactly how bad retail sales really were during the holidays, writes Todd Salamone, senior vice president of research at Schaeffer's. Moreover, fourth-quarter earnings reports will begin flowing into the headlines in the middle of the month. Finally, he says, the Obama administration officially takes over the White House later in the month, and we'll get to see what actions it takes (or plans to take) to deal with the current economic crisis and the fate of the auto industry.

"All that said, and with another holiday-shortened week, we wouldn't be surprised to see a repeat of last week, with volatility continuing to drift lower into the end of the year as equities and the broad market make little movement," Salamone notes.

Overseas, European exchanges such as the FTSE in London and the DAX in Frankfurt edged higher after Japan's Nikkei and Hong Kong's Hang Seng ended with gains.

Longer-dated U.S. Treasury securities were rising. The 10-year note was rising 22/32 to yield 2.1%, and the 30-year was rising 27/32, yielding 2.6%. The dollar was weaker against the euro and yen, and stronger against the pound as of late.

Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP contributed to this report.