Too much, too fast?
A broad-based stock rally lost steam by the close Monday, with only the blue-chip averages hanging on to gains.
By Alexandra Twin, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) - A stock advance petered out by the close Monday, with only the blue-chip averages managing to stay in positive territory.

The Dow Jones industrial average (up 35.62 to 11,144.94, Charts) added about 0.3 percent, erasing most of its gains of the session. The broader Standard & Poor's 500 (up 2.98 to 1,297.81, Charts) index added 0.2 percent, also giving back most of its highs.

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The Nasdaq composite (down 3.05 to 2,336.74, Charts) lost 0.1 percent, retreating after hitting a five-year high earlier in the session. Afternoon weakness in biotech and Internet shares caused the composite to abandon the day's gains.

The Russell 2000 (down 5.92 to 759.22, Charts) small-cap index fell after hitting a record high in the late morning, which it's already done several times this year.

Treasury prices fell, lifting the corresponding yields. Oil prices inched higher and gold jumped.

Nasdaq and S&P futures pointed to a modestly higher open for stocks Tuesday, when fair value is taken into account.

There are no economic reports due Tuesday, but the rest of the week gets busier. Wednesday brings a read on the services sector of the economy and Friday brings the March employment report.

Monday's market

Stocks slipped Friday but the market still wrapped up its best first-quarter performance in some time, with the S&P 500 posting its biggest first-quarter gain since 1999.

That momentum continued for most of Monday, losing steam in the last hour. Monday was the first session of the second quarter. The start of a new quarter tends to be positive, with investors putting money to work in 401(k) retirement plans, mutual funds and other investment vehicles.

In addition, investors may have taken the morning's weaker-than-expected manufacturing report as a sign that the Federal Reserve's rate-hiking campaign will end sooner than later, said Greg Church, president of Church Capital. But that is unlikely to be the case.

"I think the economy is hot enough that you're going to see higher interest rates than what the market is expecting," Church said.

The Fed funds rate, an overnight bank lending rate, currently stands at 4.75 percent after the Federal Reserve boosted it by a quarter-percentage point last week. It was the 15th consecutive rate hike since June 2004.

Church said that Monday's stock advance was positive, but that investors should enjoy it today because it could be hard to sustain over the week, particularly if upcoming economic reports show strength.

Strong economic reports could revive worries about higher interest rates.

But Chris Johnson, market strategist at Schaeffer's Investment Research, says he's not sure that interest rate worries will hurt stocks just yet.

"I think the advance is sustainable," Johnson said. "You have a nice combination of technical factors that should support us and the fact that the next Fed meeting is not until May, so that buys us some time."

He also said that a change in sentiment seems to be in place in the short term.

Market pessimism had been rising over the last few weeks, even as there had been some strength in the market, he said. But "once those investors that have been bearish finally breathe that sigh of relief and move into the market, you see that windfall."

What moved?

Blue-chip gains remained broad, with roughly two out of every three Dow issues rising.

Economically-sensitive issues rose. Caterpillar (up $1.69 to $73.50, Research) jumped 2.4 percent, Alcoa (up $0.34 to $30.90, Research) added 1.1 percent.

DuPont (up $0.62 to $42.83, Research), McDonald's (up $0.37 to $34.73, Research) and Hewlett Packard (up $0.63 to $33.53, Research) rose as well.

Dow stock Microsoft (up $0.35 to $27.56, Research) rose 1.3 percent on a bullish mention in Barron's over the weekend. The financial weekly said that the company's new products make it a good bet despite a delay in releasing its Vista operating system, announced recently.

On the downside, Dow component General Motors (down $1.13 to $20.14, Research) lost 5.3 percent.

GM struck a long-awaited deal to sell a majority stake in its finance arm to a group of investors led by Cerberus Capital Management. The deal will bring the troubled automaker up to $14 billion over time and could help it prop up its finances.

Oil stocks had risen sharply through the early afternoon in tune with the price of crude oil. But as crude oil scaled back, so did the underlying stocks.

Dow component Exxon Mobil (up $0.17 to $61.03, Research) ended barely higher after rising through the early afternoon. The company recently knocked Wal-Mart Stores off the top spot on the Fortune 500 list of biggest U.S. companies. (Full story.)

The Amex Oil (up 4.74 to 1,075.29, Charts) index ended up 0.4 percent, giving back bigger gains in the early afternoon.

Gold shares rose as well, with Barrick Gold (up $0.50 to $27.74, Research) up 1.8 percent.

Phelps Dodge (up $3.20 to $83.73, Research) jumped 4 percent, rising with other copper shares.

On the downside, a number of biotech stocks declined, with the Amex Biotechnology (Charts) index losing 1.4 percent.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by a narrow margin on volume of 1.70 billion shares. On the Nasdaq, decliners beat advancers three to two on volume of nearly 2 billion shares.

ISM weaker, construction stronger

The Institute for Supply Management's read on March manufacturing was released shortly after the open. The index fell to 55.2 in the month from 56.7 in February. Economists surveyed by Briefing.com thought it would rise to 57.7 in the month.

A separate report showed that construction spending rose 0.8 percent in the month, versus forecasts for a rise of 0.5 percent. Spending rose a revised 0.4 percent in February.

Treasury prices slipped, raising the yield on the benchmark 10-year note to 4.87 percent from 4.85 percent late Friday, near a 22-month high. Bond prices and yields move in opposite directions.

U.S. light crude oil for May delivery rose 11 cents to $66.74 a barrel after topping $67 earlier on the New York Mercantile Exchange.

COMEX gold for June delivery rose $7.60 to settle at $594.30 an ounce, a 25-year high.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.