Stocks finished down Monday as it appeared investor confidence in a year-end rally was waning. The Nasdaq index and small-cap issues were among the day's biggest losers. Gains in pharmaceutical shares limited losses in the blue chip Dow industrial average after Pfizer (PFE ) won a patent ruling for a key drug.
The Dow Jones industrial average fell 39.06 points, or 0.36%, to 10,836.53. The broader Standard & Poor's 500 index was down 7.40 points, or 0.58%, to 1,259.92. The Nasdaq composite index lost 29.74 points, or 1.32%, to 2,222.74.
Investors focused Monday on a court victory by Big Pharma stalwart Pfizer. A federal judge upheld the exclusivity of two patents related to its Lipitor cholesterol-lowering drug, blocking a generic version of the medicine that had threatened the company's largest source of revenue. The shares surged 8%. Rival Merck (MRK ) gained 7% after the stock was upgraded from hold to buy by Deutsche Bank.
M&A activity remained in the spotlight, as Maryland-based electric utility Constellation Energy (CEG ) agreed to merge with FPL Group (FPL ) a $22 billion deal. FPL shareholders will own 60% of the combined company.
In technology, Internet search outfit Google (GOOG ) is reportedly close to securing a 5% stake in the AOL unit of Time Warner (TWX ). Google and Time Warner shares both dipped slightly Monday.
Among sectors on the move, computers and electronics retailers gained after Circuit City (CC ) posted a third quarter profit, vs. a year ago loss, on a 13% rise in domestic same-store sales rise. The retailer also raised its fiscal 2006 domestic same-store sales growth forecast.
However, another key industry member, RadioShack (RSH ) was lower after the stock was downgraded to sell from neutral by Banc of America.
In commodities markets, January West Texas Intermediate crude oil finished lower Monday at $57.33 per barrel. The decline was hurting energy shares but not aiding the broader equity market. Some traders see warmer Northeast weather cutting demand, according to Standard & Poor's MarketScope, though some traders are betting this week's inventory reports will show stock drawdowns, particularly in natural gas. Gold futures were higher.
European markets ended mixed Monday. In London, the Financial Times-Stock Exchange 100 index was up 8.2 points to 5539.8. Germany's DAX index was off 3.48 points to 5350.18. In Paris, the CAC 40 index was off 9.55 points to 4694.86.
Asian markets closed higher. Japan's Nikkei 225 index rallied 218.41 points (1.44%) to 15,391.48. In Hong Kong, the Hang Seng index gained 153.08 points (1.02%) to 15,182.89. Korea's KOSPI index climbed 18.36 points (1.39%) to 1339.40.
Prices for 10-year Treasury notes finished modestly lower Monday at 100-16/32, for a yield of 4.44%, while 30-year bonds were higher at 110-29/32, for a yield of 4.64%. Bonds moved a bit higher following a report that the National Association of Home Builders' index declined to a lower than expected 57 level in December from 61 in November, which was revised from the 60 initially reported.
The main event Tuesday is the release of November's housing starts report. After a weak October report drew market attention, housing starts are expected to rebound 1.8% to 2.05 million units for November, says Action Economics.
Tuesday's core producer price index is likely to be a big mover, notes S&P, if the index comes in higher than the 0.1% increase anticipated.