Dec. 30 (Bloomberg) -- U.S. stocks fell on the final trading day of the year, erasing the Dow Jones Industrial Average's 2005 advance, as speculation increased that profit and economic growth will slow next year.

A fourth-quarter rally sputtered this week as bond yields and home resales suggested a weakening economy. The Standard & Poor's 500 Index trimmed its advance for the year, notching its worst performance since the end of the bear market in 2002.

``To buy stocks just because it's the end of the year is not a good reason to do it when the fundamentals indicate otherwise,'' said Peter Boockvar, equity strategist at Miller Tabak & Co. in New York. ``The yield curve is flattening in response to the slowing housing market. The implications can't be ignored. That's why we're trading the way we are.''

Energy-related companies including Halliburton Co. had the only gain among 10 groups in the S&P 500 today as oil prices surpassed $61 a barrel. Google Inc. and Humana Inc., two of the best-performing stocks this year, declined.

The Dow average fell 67.32, or 0.6 percent, to 10,717.50. The S&P 500 lost 6.13, or 0.5 percent, to 1248.29. The Nasdaq Composite Index slid 12.84, or 0.6 percent, to 2205.32. Trading on the New York Stock Exchange was 28 percent below this year's daily average as some investors took vacation this week.

Annual Results

The Dow, down 0.6 percent in 2005, had its worst annual performance since 2002 and the smallest change since 1926. The S&P 500, up as much as 5 percent this year at its high reached Dec. 14, gained 3 percent, a third of its 2004 gain. In 2003, a 26 percent rally snapped a three-year decline.

The Nasdaq, created in 1971, recorded its smallest-ever annual move, with a 1.4 percent increase.

A 0.1 percent slide this month cut the S&P 500's fourth- quarter gain to 1.6 percent. It's the first December retreat for the index since 2002.

The market is bucking a historical trend with a drop of 1.6 percent in the S&P 500 this week. Since 1969, the index averaged a 1.6 percent advance during the last five trading days of the year and the first two in January, according to the Stock Trader's Almanac.

``The Santa Claus rally hasn't happened yet, and by now investors are fearing that it won't,'' said Neil Massa, a trader at John Hancock Advisers Inc. in Boston. ``There's disappointment all around.''

Economic Growth

Economic growth in the U.S. is expected to slow to 3.4 percent next year from 3.6 percent, based on the median estimate of economists surveyed by Bloomberg. S&P 500 profit growth will ease to 12.5 percent next year from 14.5 percent, according to a Bloomberg analysis of Thomson Financial data.

For 2006, Wall Street strategists on average forecast that the S&P 500 will rise about 7 percent. That would be its third straight annual percentage gain of less than 10 percent, which has never happened before.

Next year ``will be a good, not great, year,'' said James Fisher, who helps manage $900 million at Univest Corp. of Souderton, Pennsylvania. ``It will be a stock-pickers market again, with good and bad sectors and companies.'' He expects energy, technology and health-care stocks to be the top performers and the S&P 500 to rise 7 percent to 10 percent.

Inverted Yield Curve

For the third time this week, a rare occurrence in the bond market weighed on stocks. Short-term yields on the two-year Treasury note were at 4.40 percent, more than the yield of 4.39 percent on the 10-year note. The so-called inverted yield curve has come before each of the last four U.S. economic recessions. Before this week, it last happened in 2000.

U.S. sales of previously owned homes declined 1.7 percent last month to a 6.97 million annual rate, the lowest level since March, the National Association of Realtors said yesterday.

Crude oil for February delivery climbed 1.2 percent to $61.04 a barrel in New York on concern there isn't enough supply to meet demand for motor fuel. The commodity's 2005 increase is 40 percent.

A gauge of energy companies added 0.3 percent. Halliburton, the world's largest oilfield-services contractor, rose 52 cents to $61.96. Weatherford International Ltd., the fifth-largest oilfield-services provider by sales, climbed 45 cents to $36.20.

Top Performers

Valero Energy Corp., the best performing stock in the S&P 500 this year, was unchanged at $51.60 and gained 127 percent in 2005. The S&P 500 Energy Index surged 29 percent this year, more than double the next best rally among 10 industry groups.

Google, the world's most-used Internet search engine, dropped $5.29 to $414.86. The stock more than doubled this year.

Humana, the second-largest manager of Medicare coverage, fell 71 cents to $54.33. The stock rallied 83 percent this year for the seventh-best gain in the S&P 500.

Trading was slower than average as some investors took vacation between the Christmas and New Year's holidays. Some 1.11 billion shares changed hands on the New York Stock Exchange. Seven stocks fell for every three that rose on the Big Board. U.S. stock markets will be closed on Jan. 2 for the New Year's holiday.

Some of the worst-performing shares this year rebounded including General Motors Corp., the world's No. 1 maker of cars, and Dana Corp., the biggest producer of axles for light trucks.

GM gained 41 cents to $19.42. The stock lost more than half its value this year for the steepest retreat in the Dow average.

Dana rose 9 cents to $7.18. The company said restatements going back to 2000 will reduce profit by $44 million, less than the $50 million the company estimated a week ago. Dana shares slumped 59 percent in 2005, the biggest drop in the S&P 500.

Syneron Slumps

Syneron Medical Ltd. slumped $3.94 to $31.75. Shares of the maker of products to remove hair and wrinkles using electrical and optical technology were downgraded by CIBC World Markets analyst John Calcagnini. Syneron will have a ``difficult time'' reaching revenue estimates for the fourth quarter, Calcagnini wrote in a note to clients. He cut Syneron to ``sector performer'' from ``sector outperformer.''

Learning Tree International Inc. fell $1.16 to $12.83. The provider of computer classes said fiscal fourth-quarter revenue dropped to $36.5 million from $37.3 million. The company also said it will restate more than four years of results.

S&P 500 shares, called Spiders, dropped 68 cents to $124.51. Nasdaq-100 tracking shares, known by their QQQQ symbol, declined 31 cents to $40.41.

S&P 500 futures expiring in March slid 5.30, or 0.4 percent, to 1254.80 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures fell 9 to 1659.

The Russell 2000 Index, a benchmark for companies with a median market value of $569 million, lost 4.74, or 0.7 percent, to 673.22. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, slipped 58.84, or 0.5 percent, to 12,497.18. Based on the changes in the Wilshire, the value of stocks decreased by $73.6 billion.

General Motors Corp. (GM US)
Dana Corp. (DCN US)
Google Inc. (GOOG US)
Halliburton Co. (HAL US)
Humana Inc. (HUM US)
Syneron Medical Ltd. (ELOS US)
Learning Tree International Inc. (LTRE US)
Valero Energy Corp. (VLO US)
Weatherford International Ltd. (WFT US)

To contact the reporter on this story: Hilary Johnson in New York at hjohnson10@bloomberg.net.

Last Updated: December 30, 2005 17:26 EST