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NEW YORK (CNNMoney.com) -
Stocks slumped Monday as rising oil prices and Treasury bond yields gave investors ammunition to continue bailing out of equities after the recent advance.
As of 5:30 p.m. ET, Nasdaq and S&P futures pointed to a flat open Tuesday when fair value is taken into account.
The Nasdaq composite (down 15.40 to 2,257.64, Charts) fell about 0.6 percent. The Dow Jones industrial average (down 42.50 to 10,835.01, Charts) and the broader S&P 500 (down 2.99 to 1,262.09, Charts) index both saw smaller declines.
All three major gauges had been even weaker midafternoon but managed to trim some losses near the close.
Generally, the market seems in a continued modest pullback after a five-week rally that set the major gauges at or near four-and-a-half-year highs, analysts argue. Stocks were mixed last week, with the Nasdaq continuing to advance, and the Dow and S&P 500 losing steam.
"The rally was too fast, too furious, and stocks have gotten way overbought, so we're probably going to see a pullback for another week or so," said Harry Clark, founder and CEO of Clark Capital Management Group.
Clark expects that after that pullback, stocks should be able to resume the upward move into the end of the year.
"Next year is going to be tougher," he added. "We're going to see slower earnings and economic growth, and stocks aren't going to like it. But ahead of that, I think we'll see more gains. Seasonal factors are very strong."
December is traditionally the best month of the year for the S&P, with the index having gained an average of 1.7 percent in the month since 1950, according to the Stock Trader's Almanac.
However, for the short term, more of a pullback could be in store.
"The economic growth continues to be strong, but that positive news is now weighing heavily on stocks because of its impact on bonds," said Jack Ablin, chief investment strategist at Harris Private Bank.
Bond yields have been rising over the last week or so, with investors betting that a recent spate of strong economic news means that the Federal Reserve's rate-hiking campaign may not end as soon as some investors hoped.
Treasury prices slipped, raising the yield on the 10-year note to 4.56 percent from 4.51 percent late Friday. Treasury prices and yields move in opposite directions.
Meanwhile, U.S. light crude oil for January delivery briefly jumped back above $60 a barrel before settling just below it at $59.91 a barrel on the New York Mercantile Exchange.
Tuesday brings the October read on factory orders. Orders are expected to have risen 1.5 percent in the month after falling 1.7 percent last month.
What moved?
Market breadth was negative. On the New York Stock Exchange, losers beat winners 10 to seven on volume of just over 1.68 billion shares. On the Nasdaq, decliners beat advancers three to two on volume of nearly 1.68 billion shares.
Intel (down $0.53 to $26.90, Research) eased almost 2 percent after saying that it planned to invest more than $1 billion in India for research and development, and to invest in tech and telecom start ups.
Intel was one of many chip stocks sliding, sending the Philadelphia Semiconductor (down 7.92 to 497.67, Charts) index, or the SOX, down by 1.6 percent.
Lexar Media (down $0.81 to $7.94, Research) slumped more than 9 percent after a California court said that there must be a new trial to determine damages against Toshiba. Earlier in the year, a court had awarded Lexar, a flash memory storage maker, $465 million in damages in a suit over theft of trade secrets.
Rival SanDisk (up $0.81 to $48.56, Research) slipped as well.
A slew of homebuilders fell, lowering the Dow Jones Home Construction (down $8.09 to $935.77, Research) index by nearly 0.9 percent.
On the upside, Guidant (up $6.16 to $67.98, Research) shares soared after Boston Scientific made a $25 billion bid for the fellow medical device, outshining Johnson & Johnson (down $0.16 to $61.05, Research)'s earlier bid for Guidant.
Boston Scientific (down $0.98 to $26.35, Research) shares fell, however, after the company announced separately that it was recalling a device aimed at treating pulmonary embolism due to reports of a defect that could cause serious injury or death.
Energy stocks were a notable standout to the upside. The Amex Oil (up 9.50 to 1,016.45, Charts) index gained close to 1 percent.
In the morning's lone economic report, the Institute for Supply Management's service sector index fell to 58.5 in the month from 60 in October. Economists predicted it would decline to 59.3 in the month, according to a consensus of economists surveyed by Briefing.com.
The dollar fell versus the euro and the yen.
COMEX gold for December delivery rose $5.60 to $508.90 an ounce.
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