Major stock proxies sulked lower into the Christmas holiday, which was fitting, given that the fundamental backdrop didn't support Santa's appearance.

The

Dow Jones Industrial Average

fell 0.5% to 8448.11, the

S&P 500

shed 0.6% to 892.47, and the

Nasdaq Composite

lost 0.7% to 1372.51.

U.S. financial markets closed early Tuesday in advance of Christmas Eve celebrations and Wednesday's holiday closure. In

New York Stock Exchange

trading, just 457 million shares were exchanged before the 1 p.m. EST close of trading.

The half-session setback was largely attributable to a weaker-than-expected durable goods report for November. The Commerce Department reported orders for big-ticket items fell 1.4% last month vs. expectations for a 0.8% rise. Orders for nondefense capital goods, which exclude aircraft and other transportation equipment, fell 1.3% vs. expectations for a 0.2% rise and a 1.6% gain in October.

The durable goods data, in conjunction with further confirmation of weak holiday sales for retailers, generated further concern about the strength of the recovery and prospects for fourth-quarter GDP.

On the retail front, the Bank of Tokyo-Mitsubishi/UBS Warburg's same-store sales index rose 1.7% last week. However,

Target

(TGT) - Get Report

said its same-store sales were "well below" forecast for a third straight week, while

Ultimate Electronics

(ULTE)

because the latest consumer electronics retailer to warn that results will not meet prior guidance. Target fell 1%, Ultimate tumbled 13.5%, and the S&P Retail Index shed 0.7%.

The latest evidence of the economy's struggles to work through its so-called soft spot provided a boost to Treasuries. The price of the benchmark 10-year note rose 12/32 to 100 20/32, the yield falling to 3.92%.

Conversely, the dollar suffered from the weak economic data and rising geopolitical unrest. In addition to ongoing concerns about potential war with Iraq and the strike in Venezuela, traders are now also focusing on the growing tensions between the U.S. and North Korea. Secretary of Defense Donald Rumsfeld said "we are capable of fighting two major regional conflicts" after North Korea warned of an "uncontrollable catastrophe" if the U.S. refuses to allow North Korea to continue pursuing its nuclear program.

It didn't get as much attention, but in addition, Iran -- the third member of President Bush's "axis of evil" -- said it will proceed with construction of a nuclear power plant of its own.

The U.S. Dollar Index fell 0.35, to 103.29.

Somewhat predictably, rising geopolitical concerns gave another boost to gold and oil. The price of gold rose 0.5% to $347.30, while crude futures climbed 0.8% to $32 per barrel.

Back on the equity front,

Sun Microsystems

(SUNW) - Get Report

was among the gainers among big-caps. Sun climbed 4.7% after a U.S. District judge ruled that

Microsoft

(MSFT) - Get Report

must include Sun's Java in its Windows operating system. Microsoft shares dipped 0.3%.

And to All a Good Night

There are still four trading days left in 2002, but time is running out for the proverbial (if not actual) year-end rally. We discussed the implications of its failure to arrive

last night but acknowledge that it is premature to declare the year-end rally a no-show, as several readers anxiously noted.

That said, I wanted to close tonight's column by sharing some observations of Kent Engelke, a capital markets strategist at Anderson & Strudwick.

"We can comment about the holiday sales ... the impending war with Iraq, the Venezuelan situation and ... the possible escalation of tensions with North Korea," Engelke wrote. "We can write volumes about the three-year bear market that has tried the patience of Job."

Instead, he suggested investors should focus on the spirit of Christmas. Regardless of your religion or whether you believe in God or not, "treat one another in the manner that you would like to be treated," he implored. "If this were everyone's philosophy, this world would be even greater than it already is. Don't let the words 'good will to men and peace on earth' be some empty holiday slogan."

Amen to that, and happy holidays to all.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task. JRaess: Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task.