NEW YORK ( TheStreet) -- U.S. stocks faded late and finished in negative territory Monday, continuing a recent trend that's seen acute moves near the closing bell. Investors began the day buoyed by news that China will allow more flexibility in its currency , but the major averages deteriorated late as enthusiasm about the move faded.

After gaining over 100 points earlier in the session, the Dow Jones Industrial Average finished down by eight points, or 0.1%, at 10,442, and the S&P 500 lost 4 points, or 0.4%, to 1113. The Nasdaq also fell below the flat-line late, falling behind by 21 points, or 0.9%, at 2289.

"The news that China is going to allow the yuan to move a little, well, is it really that significant? Probably not. But there was a big upward reaction to that in the morning," said Jim Paulsen, chief investment strategist at Wells Capital Management, just before the close. "But in reality, there wasn't anything overwhelming to justify 150 points. I think people are just looking at the economic news vacuum and are maybe taking a little profits off the table. I think the end-of-the-day trade right now is really because there really isn't any news out there."

But the decision spurred a rally across global markets on Monday. Hong Kong's Hang Seng soared 3.1%, and Japan's Nikkei jumped 2.4%. The FTSE in London climbed 0.9%, and the DAX in Frankfurt gained 1.2%.

The Economy

Over the weekend, China's central bank said it will begin to rely more on a basket of currencies including the U.S. dollar to establish the exchange rate for the yuan , making good on its promise to allow more flexibility in its currency.

The yuan has been pegged to the dollar since 2008. Critics say the yuan policy has made Chinese goods cheaper in the U.S., but more expensive to export to China, widening the trade gap.

There are no economic reports scheduled for release during the session Monday.

Company News

Alcoa ( AA) was the Dow's top performer as the basic materials sector got a boost from China's decision to gradually revalue its currency. General Electric ( GE) and American Express ( AXP) were other top gainers.

Merck ( MRK), Microsoft ( MSFT) and Home Depot ( HD), meanwhile, were among the handful of components trading in negative territory and leading the Dow lower.

BP ( BP), which said costs related to its response to the Gulf of Mexico oil spill have reached $2 billion, is reportedly planning to raise $50 billion to cover its unquantifiable liabilities. BP lost 4.5% to finish at $30.33.

Barnes & Noble ( BKS) lowered the price of its Nook with 3G and Wi-Fi capabilities to $199 from $259, giving it a leg up on Amazon's ( AMZN) Kindle e-reader, which sells for $259. The new price also puts it more in range with the $150 Kobo that Borders ( BGP) recently launched.

Ralcorp ( RAH) is snapping up American Italian Pasta ( AIPC) for roughly $1.2 billion.

JPMorgan Chase ( JPM) is reportedly in advance talks to buy Brazilian asset management company Gavea Invetimentos, according to the Financial Times.

Specialty drugmakers Biovail ( BVF) and Valeant ( VRX) have agreed to merge, forming a new company named Valeant Pharmaceuticals International.

Corn Products ( CPO) agreed to acquire National Starch from Akzo Nobel for $1.3 billion in cash.

Commodities and the Dollar

Crude oil for July delivery closed up by 64 cents, to trade at $77.82 a barrel.

Elsewhere in commodity markets, the August gold contract settled $17.60 lower at $1,240.70 an ounce.

The dollar was trading higher against a basket of currencies, with the dollar index up by 0.3%.


The benchmark 10-year Treasury was down 6/32, lifting the yield to 3.247%.

The two-year note was falling slightly, boosting the yield to 0.718%. The 30-year bond was weakening 10/32, strengthening the yield to 4.165%.

--Written by Melinda Peer and Sung Moss in New York.