Stocks declined, but ended significantly off session lows, as financials gained and the dollar slipped, although investors remained concerned about the effectiveness of Europe's attempt to contain sovereign debt troubles.
The Dow Jones Industrial Average fell 39.51 points, or 0.4 percent, to close at 11,052.49. The blue-chip index plunged 162 points earlier in the day, falling below the psychologically important benchmark.
Hewlett-Packard, Home Depot , and Verizon were the top laggards on the Dow, while American Express and Bank of America rose.
The S&P 500 fell 1.64 points, or 0.1 percent, to close at 1,187.76, while the Nasdaq fell 9.34 points, or 0.4 percent, to close at 2,525.22. Both were off lows of the session. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 22.
Telecom, consumer discretionary and technology sectors led the S&P 500 lower, while financials and energy sectors rose.
The dollar rose against a basket of currencies, although it gave up some gains in afternoon trading. Oil prices rose above $85 a barrelwhile gold climbed to $1,366 an ounce.
The market turned around mid-afternoon without a clear catalyst. One factor may have been technical: As the S&P 500 fell to 1,177, the bottom-range of its 50-day moving average, buyers emerged and the index began moving higher, said Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets.
Kruszenski said stocks are likely to remain range-bound, between 1,175 and 1,200 for the S&P 500, "until we either get news or something that will cause us to break out."
He noted, too, that buyers tend to come in when the market slumps in hopes of realizing a better performance in their portfolios before the year is out. Moreover, though, no significant economic news is due until Wednesday, when the ADP Employment Report and ISM manufacturing index are released, he said. Also, Kruszenski added, trading volume remains light, making the market "easy to push around."
Volume on the consolidated tape of the New York Stock Exchange was only 3.6 billion shares. On the NYSE floor, 924 million shares changed hands.
The market was expected to get a boost following a 6.4 percent rise in retail sales on Black Fridaycompared to a year earlier, and the expectations of a spike in online retail salestoday—Cyber Monday.
But spending by U.S. consumers failed to lift stocks overall, and for most retail names. Exceptions included Internet retailers Amazon.com and Overstock.com .
Ebay fell after Stifel Nicolaus cut the online auction site to "hold" from "buy," on concerns it is losing market share to retailers like Amazon.com, that offer free shipping.
American Eagle , meanwhile, fell despite an upgrade by Janney Capital Markets to "buy" from "neutral," saying the apparel retailer would likely increase earnings-per-share. Rivals were mixed, as Zumiez and Abercrombie & Fitch rose, and Pac SunwearJCrew slumped.
Other big name retailers also fell, including Nordstrom , TJX Companies and Best Buy .
Meanwhile, Steve Madden shares rose after Barron's wrote in an article that the footwear maker
Personal computer companies also felt pressure from news that Gartner cut forecasts for global computer shipments for this year and next, citing the rise of tablet sales.
Gartner said PC shipments would rise 14.3 percent in 2010, and 15.9 percent in 2011, down from earlier growth forecasts of 17.9 percent in 2010 and 18.1 percent in 2011.
Dell and IBM all fell in addition to HP .
Apple shares slipped even after brokerage Thinkequity raised its price target on the iPod maker to $375 from $350.
Bank stocks were some of the day's best performers. JPMorgan Chase , Bank of America and Citigroup all ended higher.
In addition, RBC Capital Markets issued a note to clients saying they expect several banks to raise their dividends in the first quarter of 2011 as they comply with new capital requirements from the Federal Reserve.
In corporate news, Wal-Mart is purchasing a controlling stake in South African discount retailerMassmart for $2.3 billion.
Starbucks accused Kraft of mismanaging sales of its packaged coffee in grocery stores. Starbucks may want to end its 12-year partnership with Kraft, documents quoted by Reuters show.
United Healthcare fell after news the health insurer expects profits to fall 8 percent next year. The adjusted forecast, however, was better than some analysts had feared.
Cardinal Health announced its second major deal of the month, saying it will buy Chinese pharmaceuticals distributor Zuellig Pharma China for $470 million. Earlier this month, Cardinal agreed to buy pharmaceuticals distributor Kinray for $1.3 billion.
Amarin soared after news its lead drug candidate to cut triglyceride levels was working in late-stage tests aimed at not raising so-called "bad" cholesterol levels.
BP agreed to sell its 60 percent stake in Pan American Energy for $7 billion.
Stillwater Mining slumped after news Norimet, a unit of Norilsk Nickel Mining & Metallurgical, plans to sell at least 37 million shares of the company, which produces platinum and palladium and other metals. Norimet owns 55.5 stake in Stillwater.
Meanwhile, solar companies First Solar , LDK Solar and Sunpower remained under pressure even after ThinkEquity raised its ratings to "buy" from" hold" on the firms.
FedEx shares rose after Credit Suisse lifted its rating on the stock, saying growth in global industrial production is likely to help drive the shipper's performance.
Over the weekend, European Union finance ministers crafted a $112.2 billion aid package package for Ireland and a plan to stem fears of a euro zone debt crisis. But investors continued to worry that debt troubles in Portugal and Spain could lead to similar bailouts in the future.
Those worries spilled over into the U.S. markets, countering a strong weekend of retail sales as the critical holiday shopping season got underway.
"Borrowing costs have risen again for European countries and that’s a pressing issue," said Nino Jimenez, senior vice president at Brinson Patrick, a broker-dealer.
Also, while increased sales and foot traffic were encouraging, shoppers were drawn to stores by heavy discounting, which could hurt earnings, Jimenez said.
Moreover, with all the uncertainty in the world making markets jittery, "people are trying to take profits for the year and lock in some gains," he said. "They'd rather have realized gains than unrealized losses."
Meanwhile, market research firm Trim Tabs remains neutral on the stock market, citing Europe's sovereign debt concerns, the tensions between North and South Korea, and the continuing fallout from a broad U.S. investigation into insider trader as reasons to give investors pause.
Also, the firm notes, corporate insiders continue to dump stocks. Selling reached 11.7 billion in November, the firm said, the highest monthly amount since November 2007.
Meanwhile, Congress returns to work with expiring Bush-era tax cuts likely to be high on the discussion agenda.
On Tap This Week:
TUESDAY: ISM-NY report on business, S&P/Case-Shiller home price index, consumer confidence, Minnesota Fed Pres Kocherlakota speaks, Bernanke speaks, Obama meets with Congressional leaders
WEDNESDAY: Auto sales, MBA mortgage applications, Challenger job-cut report, ADP employment report, productivity and costs, ISM mfg index, construction spending, oil inventories, Beige Book, Fed vice chair Yellen speaks
THURSDAY: ECB announcement, jobless claims, pending home sales, Philadelphia Fed Pres Plosser speaks, Fed Gov. Duke speaks, chain-store sales; Earnings from Toll Brothers, Del Monte and Kroger
FRIDAY: Employment situation, factory orders, ISM non-mfg index
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