Nasdaq negativity, Dow downer

NEW YORK (CNNMoney.com) -- Stocks slumped Monday afternoon, with investors bailing out after the recent rally, amid a falling U.S. dollar, higher oil prices, a cautious outlook from Wal-Mart and some jitters ahead of a slew of economic reports due later this week.

The Nasdaq composite (down 46.46 to 2,413.80, Charts) lost more than 2 percent with roughly 2 hours left in the session, with a variety of tech shares declining. The tech-fueled index touched a nearly six-year high last week.

The Dow Jones industrial average (down 153.98 to 12,126.19, Charts) lost nearly 140 points, or around 1.1 percent, and the broader S&P 500 (down 15.68 to 1,385.27, Charts) index slid 1.3 percent. Last week, the S&P 500 hit a six-year high.

The Russell 2000 (up $0.01 to $20.30, Charts), the small-cap stock benchmark, lost 2.2 percent.

Although the weak U.S. dollar and the rise in oil prices added a sense of caution to the market, stocks were likely vulnerable to a pullback anyway. Many analysts have called for a period of consolidation of late, following the substantial run the stock market has seen seen bottoming in July.

As of Friday's close, the Nasdaq was up 11.6 percent year-to-date and up 8.6 percent in the fourth quarter. The Dow was up 14.6 percent in 2006 and 5.1 percent since Sept. 30. The S&P 500 had risen 12.2 percent this year and 4.9 percent since the end of September.

Small caps have risen even more, with the Russell 2000 up 17.7 percent in 2006, as of Friday, and up 9.2 percent in the third quarter.

"It's probably one of those things today where there needs to be a little profit taking after the run up we've had," said Tom Schrader, co-head of listed trading at Legg Mason.

He noted that with the exception of energy, pretty much every other stock sector was down. However, the selloff was what he called "orderly" and not panicky in tone.

Stocks have been on a tear since the summer, with investors reacting to a variety of supportive factors. They include: lower oil prices, strong corporate earnings, a Federal Reserve that seems to be on hold, and an economy that appears to be slowing enough to cool inflationary pressures, but not so much as to be heading toward a recession.

However, concerns about the economy remain, particularly amid the slowdown in the housing market, and market participants may have been jittery about the bevy of reports due later this week. Reports are due on new and existing home sales, personal income and spending, gross domestic product growth, manufacturing, construction and consumer confidence.

Ahead of those reports, a pair of brokerages issued forecasts on stocks and the economy in 2007.

A Citigroup (Charts) economist and market strategist both said Monday that worries about the housing market slowdown are overdone and should not send the economy into a recession or cause the markets to slump next year.

A Goldman Sachs report forecast the S&P 500 should reach 1,460 by next September, a modest 4.2 percent increase over Friday's close, Briefing.com reported.

All financial markets were closed Thursday for Thanksgiving and attendance was light for Friday's shortened session.

Volume remained light on Monday, with many Wall Street professionals still driving back after the holiday, Schrader said. "I think tomorrow will be a better indicator," he said, of whether stocks were set for a bigger selloff.

One bright spot: early positive reports from retailers on "Black Friday," the day after Thanksgiving and the start of the holiday shopping period.

Reports continued to flow in over the weekend, suggesting shoppers came out in droves, although it was unclear how this would impact retailers' overall profits. (Full story).

However, on the downside, Wal-Mart Stores forecast over the weekend that November sales at stores open a year or more, also known as same-store sales, would fall 0.1 percent. The forecast included the "Black Friday" results. Wal-Mart (down $1.17 to $46.73, Charts), a Dow component, fell 2 percent Monday.

Google (down $14.92 to $490.08, Charts) slipped 3 percent after a report in Barron's over the weekend said the stock - which recently surpassed $500 per share for the first time - may be too expensive relative to earnings.

However, losses were widespread, with 27 out of 30 Dow components sliding. Other decliners included Dow tech shares IBM (down $1.74 to $91.61, Charts), Intel (down $0.49 to $21.10, Charts) and Hewlett-Packard (down $0.79 to $38.77, Charts), which all lost more than 1 percent.

Airline stocks slid in response to the rise in oil prices. Continental (down $3.12 to $42.26, Charts) lost over 4 percent and American Airlines parent AMR (down $1.89 to $32.21, Charts) lost 3.6 percent. The Amex Airline (Charts) index fell 4.5 percent.

Market breadth was negative. On the New York Stock Exchange, losers topped winners by four to one on volume of 1.02 billion shares. On the Nasdaq, decliners beat advancers by around 7 to 2 on volume of 1.31 billion shares.

Rising oil prices also added a sense of caution to the markets. U.S. light crude oil for January delivery rose 86 cents to $60.10 a barrel on the New York Stock Exchange.

Treasury bond prices reversed course after falling in the morning, inching higher. The advance lowered the yield on the 10-year note to 4.54 percent from 4.55 percent late Friday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar slumped to a 20-month low versus the euro and rose modestly versus the yen.

COMEX gold rose $11.10 to $646.50 an ounce.

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