Stocks opened the day after Christmas in their own universe, rising solidly despite heightened concerns over tensions between the U.S. and Iraq, as well as North Korea's (and Iran's) nuclear ambitions, and the strike in Venezuela.

But by the end of a sparsely traded session, major averages succumbed to those same fundamental factors, which kept upward pressure on gold and oil, and downward pressure on the dollar.

The Dow Jones Industrial Average fell 0.2% to 8432.61 after trading as high as 8565, while the S&P 500 shed 0.3% to 889.66 vs. its intraday best of 903.89. The Nasdaq Composite lost 0.3% to 1367.90 vs. its early high of 1392.60.

With many traders taking extended holidays, just under 700 million shares were exchanged on the Big Board, the slowest full-session day of the year, while 669 million traded over the counter.

The price of the benchmark 10-year note rose 8/32 to 100 26/32, its yield falling to 3.90%.

Stocks rallied early after the government reported a sharper-than-expected drop in weekly jobless claims. The gains came despite lowered December sales guidance from Wal-Mart ( WMT), the latest confirmation of a distressing holiday shopping season for retailers. Wal-Mart, which has been battered in recent weeks, rose fractionally, but online retailer ( AMZN) shed 7.3%.

Initially, major averages also overcame weakness in Pfizer ( PFE) and Pharmacia ( PHA), which declined amid reports the arthritis drug Celebrex, which they comarket, may not be as effective as hoped in stopping bleeding in patients with ulcers. The Amex Drug Index fell nearly 2%.

The inability of averages to sustain early gains raised further doubts about prospects for the much-discussed and still-elusive year-end rally. Still, given the holiday atmosphere and the market's relatively minor moves, market participants were loath to read too much into the session's significance.

"We're basically in a wait-and-see mode," said Richard Dickson, senior strategist at Lowry's Reports. "The indicators we're looking at are just stuck in neutral."

One indicator, Lowry's buying power index, tracks demand for stocks in terms of volume on upside vs. downside days. The index has been weakening and was declining even as the market was making its post-Oct. 9 highs, Dickson said. However, there hasn't been a big pickup in selling pressure, either.

"On balance, we're more worried about downside risk than missing the next big rally but the point we're making is 'patience is a virtue,'" he said. "Let's see which way the market comes out of its trading range before drawing conclusions."

In terms of ranges for major averages, he mentioned the following: 8350 to 8640 for the Dow, 880 to 910 for the S&P and 1350 to 1410 for the Comp.

Major averages were firmly ensconced within those ranges Thursday, albeit at the lower end.

Geopolitics Wrangle Currencies, Commodities

Early on, the dollar traded at its lowest level since Jan. 12, 2000, vs. the euro, and its lowest vs. the Swiss franc since January 1999, amid reports U.S. and British aircraft struck Iraq command and control facilities south of Baghdad in response to Iraqi violations of the no-fly zone.

Meanwhile, NATO Secretary-General George Robertson was quoted as saying NATO has a "moral obligation" to support U.S. military action against Saddam Hussein. Also, Syria denied that it has provided a repository for Saddam Hussein's weapons of mass destruction after Israel said it was looking into reports suggesting as much.

Elsewhere, the International Atomic Energy Agency said North Korea has moved fresh fuel to a nuclear reactor that the U.S. has said could be used to produce weapons-grade plutonium. North Korea has removed United Nations' monitoring equipment from the plant.

The dollar recovered from its intraday lows, but geopolitical developments kept pressure on the greenback in light trading. The U.S. Dollar Index fell 0.36 to 102.80.

Meanwhile, employees of Venezuela's state oil company voted to maintain a strike that is now 25 days long. Along with another winter storm in much of the U.S., that helped crude futures rise 1.6% to $32.49 per barrel.

Finally, gold climbed 0.6% to $349.40 per ounce amid investors' continued search for "safe-haven" investments, and distaste for the dollar.

It seems clear to most observers that gold is in a bull market, but the question of its durability remains very much in doubt, as reported here last week.

On the other hand, some veteran gold watchers are thinking big thoughts for the yellow metal.

Richard Russell, editor of Dow Theory Letters, recently opined that before gold's bull market is over, its price and the Dow will cross. Where? "Around $3,000," Russell wrote.

Notably, $3,000 was also a level mentioned by Jim Dines, editor of The Dines Letter.

"We're looking for at least $3,000 and possible $5,000 within the next few years," Dines said in a brief interview Thursday. Such near-unthinkable levels are doable "as soon as the equity market caves in," he said, implying a belief that the equity market hasn't already caved in. (Dines turned bearish on stocks in 2000 for the first time since 1985, and after being especially bullish on Internet shares in the late 1990s.)

Dines turned bullish on gold right after the Sept. 11, 2001, attacks, suggesting geopolitical events are a crucial element to his outlook. Among other reasons, he said Sept. 11 spurred a "decided reversal" in the trend of increasing power for individuals, culminating with the mass usage of the Internet, back toward the superior position of governments.

Such a development "would coincide with demand for the safe-haven refuge of old," Dines said. (This thesis about the power of individuals vs. governments is described in his book, Making Money Using Mass Psychology," which I haven't read and therefore can't recommend; I'm pointing it out for the sake of information.)

As mentioned above, the conversation was brief and I can't go into much more detail than that. I mention his seemingly outlandish forecast for gold because Dines said it's seemingly as outlandish as his forecast in 1958 that gold would some day exceed $400 per ounce. At the time, it was trading at about $35 per.

Just something to contemplate on an otherwise fairly forgettable day.
Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to Aaron L. Task.

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