With the stock market looking to start a fourth week of gains, another drop in oil prices gave aid to some stocks Monday but pulled the rug out from under others. In a day of modest moves for major averages, strength in homebuilders, retailers and airlines was offset by weakness in energy companies of all kinds.

The

Dow Jones Industrial Average

gained 11.23 points to 10,550.24, while the

S&P 500

lost 0.35 points to close at 1183.82. The

Nasdaq Composite

added 8.75 points to 2094.09.

Among big-cap movers,

Wal-Mart

(WMT) - Get Report

rose 1.5%,

Best Buy

(BBY) - Get Report

rose 3.2% and

Target

(TGT) - Get Report

added 0.8%.

Delta

(DAL) - Get Report

, with fresh concessions from pilots, led its sector higher and rose 10%.

ExxonMobil

(XOM) - Get Report

lost 1.7%,

BP

(BP) - Get Report

dropped 1% and

ChevronTexaco

(CVX) - Get Report

slid 2.9%.

Oil finished down 1% to $46.85 on Monday after hitting an intraday low of $45.25, the lowest in almost two months.

Gold and the dollar, which have been vying for crude's former title as record-setter of the day every day, both took a breather on Monday. Gold backed off a 16-year high to close at $437.30. The dollar, which has set a record low against the euro three times in the last week, dialed back a smidge on Monday and the euro finished just below the $1.30 psychological barrier. The yield on the Treasury's 10-year note was just about unchanged at 4.19%.

Homebuilders surged after

William Lyon

(WLS)

said late Friday it would buy back up to 20% of its shares, and data released by the National Association of Realtors showed most metro areas continued to experience increases in median home prices in the third quarter. Lyon shares gained 22%,

Pulte Homes

(PHM) - Get Report

rose 1.9% and

Lennar

(LEN) - Get Report

added 4%.

For the year ended Sept. 30, prices increased 54% in Las Vegas, the biggest one-year jump ever recorded, 33% in San Diego, 29% in Palm Beach, and so on, the realty group said. Only a handful of cities experienced price year-over-year declines, including Dallas, Houston and Kalamazoo, Mich.

RealMoney.com

contributor Robert Marcin said he saw Monday's move as "short squeeze" and added to his long positions, without specifying. Marcin has been saying that a healthy slowdown will bolster homebuilders' cash flow and price-to-earnings multiples. Whether markets that experience 54% gains slow in a healthy or unhealthy way as interest rates rise is yet to be seen.

At the same time, home supplier

Lowe's

(LOW) - Get Report

disappointed with its outlook for next year and its shares slipped 1.7%. Market leader

Home Depot

(HD) - Get Report

reports on Tuesday.

Hiking in December

The macroeconomic news continued to be good, which also may have helped homebuilders, retailers and others that depend on consumer demand. The New York Fed's Empire State manufacturing survey improved to a reading of 19.8 in November from 17.4 the previous month. Any reading above zero indicates expansion in the local manufacturing industry.

Officials at the

Federal Reserve

have certainly taken notice. Fed Governor Mark Olson spoke on Monday in Toronto and gave a bullish assessment of the economy. Fourth-quarter growth should be on a similar pace to the 3.7% advance in the third quarter, he said. He gave several reasons for the continued strength, including the low level of the central bank's fed funds rate. The Fed has repeatedly said it wants to get the rate, at 2% after last week's hike, back to a "neutral" level without ever spelling out precisely what that would be.

Olson explained that it's hard to know precisely what level is neutral -- i.e., neither stimulating nor depressing the economy -- because it depends on circumstances. Given recent 2% inflation readings, the 2% fed funds rate should be considered well below the historical average of 2.75% over inflation.

"Of course, this long-run average may differ from the level of the real federal funds rate that is currently consistent with moving economic activity in line with its potential and keeping inflation low and stable," Olson explained. "But even taking into account possible factors that would tend to push down the equilibrium rate -- for example, business pessimism, energy prices and our net export position -- the real funds rate still seems low."

Barring surprising weakness in the November payrolls report, Olson's comments are consistent with another 25 basis-point hike in the fed funds rate at the Dec. 14 meeting.

The Great Payout

Don't blame

Microsoft

(MSFT) - Get Report

for the market's weakness on Monday. The software giant's shares slid $2.58, or 8.6%, on Monday, as Friday was the last day to own the stock and qualify for the upcoming special dividend. Like pretty much every other stock, the shares slip by the amount of the payout, $3.08 per share, once they begin trading "ex-dividend." So in reality, Microsoft was "up" 50 cents on the day.

Microsoft is a Dow component, of course, but the indexing group at Dow said on Friday it would adjust the math to avoid any impact from the dividend-related fall in Microsoft. Nasdaq also said it would adjust its composite and 100 indices to avoid any impact.

There could be an indirect impact on Microsoft itself because of the S&P 500, however. That index weights each component based on total stock market value. Microsoft's market cap is expected to shrink by $32 billion ex-dividend, and possibly fall from second- to third-biggest in the index behind ExxonMobil. The lower weight means that index funds won't have to own as much Microsoft to mirror the S&P 500's returns and that could prompt some additional selling pressure on Microsoft shares.

In keeping with TSC's editorial policy, Pressman doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

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