US stocks: Market ends lower after oil and dollar fall

NEW YORK - US stocks halted their "Santa rally" on Monday and ended lower as a sharp drop in the oil price knocked down shares of energy-related companies such as Exxon Mobil Corp., while the dollar resumed its decline, dropping to fresh lows against the euro.

Meanwhile, some insurance stocks slipped in the wake of the devastating tsunamis that killed more than 23,000 in several countries in South and Southeast Asia.

But some retailers' stocks gained after reports of stronger holiday spending. MasterCard's SpendingPulse data found sales until December 24 were 8.1 per cent higher than a year ago with its data, including both online sales and sales of gift cards.

The Dow Jones industrial average was down 50.99 points, or 0.47 per cent, to end at 10,776.13. The Standard & Poor's 500 Index was down 5.21 points, or 0.43 per cent, to close at 1,204.92. The technology-laced Nasdaq Composite Index was down 6.40 points, or 0.30 per cent, to finish at 2,154.22.

Trading was very light, with Wall Street sparsely staffed following the Christmas break. Around 921 million shares changing hands on the New York Stock Exchange, far below the 1.4 billion daily average for last year. About 1.48 billion shares were traded on Nasdaq, below the 1.69 billion daily average last year.

Decliners outnumbered advancers on the NYSE by a ratio of about 5 to 3 and about 3 to 2 on Nasdaq.

"We're seeing light holiday trading. Christmas is over -- we had the Santa rally, but that seems to have abated because it's a huge vacation week and a lot of people are out," said Brian Williamson, vice president, equity trading at The Boston Co. Asset Management.

Before the three-day Christmas break, the Dow and the S&P 500 hit fresh 3 1/2-year highs. Wall Street calls the typical seasonal run-up in stocks a "Santa Claus" rally.

But on Monday, not even a tumble in the oil price helped equities. Crude oil for February delivery fell US$2.86 to settle at US$41.32 a barrel on the New York Mercantile Exchange. A falling oil price typically helps the market because it lowers corporate costs and helps consumer spending -- but equity markets were on Monday unresponsive to the drop in prices.

"There's a dislocation between oil and the markets -- oil is down, but it doesn't seem to be helping equities today," Williamson said.

The steep decline in oil prices, however, pushed down shares of energy-related firms, with Exxon, one of the 30 stocks in the Dow, falling 2.1 per cent, or US$1.09, to US$50.88. Its rival ChevronTexaco Corp. slid 1.25 per cent, or 66 cents, to US$52.01.

Also weighing on the market was the dollar, which resumed its decline, hitting fresh lows against the euro. According to Reuters data, the euro hit a new all-time high of US$1.3640.

A weaker dollar "makes our exports cheaper, but it makes imports harder to buy for the consumer and makes US equities a little less attractive," Williamson said.

Meanwhile, shares of home builders fell, with the Dow Jones index of home builders off nearly 2 per cent at 771.19. Home builders, which are sensitive to spikes in interest rates, fell following a tumble in US Treasuries prices and a resultant run up in bond yields. The yield on the benchmark 10-year US Treasury note briefly jumped to 4.30 per cent for the first time since early December.

Following the devastating tsunamis in Asia, Prudential Equity Group insurance analyst Jay Gelb said storm losses might be borne by RenaissanceRe Holdings Ltd., XL Capital Ltd. and Ace Ltd., though the final damages should not be significant. RenaissanceRe fell 1.11 per cent, or 57 cents, to US$50.98.

Among retailers making gains were Amazon.com, Inc. up 9 per cent, or US$3.32, at US$42.25, after the online retailer said its holiday sales season was the busiest ever.

Shares of Wal-Mart Stores Inc. rose 0.46 per cent, or 24 cents, to US$52.79 after the world's largest retailer said it expects sales at its US stores open at least a year to be in the middle of a previously forecast gain of between 1 per cent and 3 per cent in December.

And Coach Inc. advanced 0.74 per cent, or 41 cents, to US$55.72 after the US luxury accessories company raised its quarterly sales forecast on the back of strong holiday sales, particularly for its upscale handbags and women's accessories.

"The only area that seems to have held their gains since the opening are the retailers -- other than that, it is pretty mixed," said Owen Fitzpatrick, head of the US Equity Group at Deutsche Bank Private Wealth Management.

Investors were hoping for "more of a good ending to the year" for retailers, he said.

Traders said there was no reaction in the markets to a report that an audio tape purportedly from al Qaeda leader Osama bin Laden urged Iraqis on Monday to boycott January's elections.

- REUTERS