Stocks still looking for Santa

NEW YORK (CNNMoney.com) -- Stocks declined in pre-holiday trading Friday, raising concerns about whether Santa will bypass Wall Street this year.

The Dow Jones industrial average (down 78.03 to 12,343.22, Charts) and the tech-heavy Nasdaq composite (down 14.67 to 2,401.18, Charts) both tumbled about 0.6 percent. The broader S&P 500 index (down 7.54 to 1,410.76, Charts) posted slimmer losses.

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Stocks usually enjoy a boost, called the Santa Claus rally, during the last five trading sessions of the year.

But that may not be the case this year. For one, stocks have already run up big gains this year. The Dow is up 15 percent in 2006, the S&P 500 has gained 13 percent and the Nasdaq is up 9 percent.

Christmas falling on a Monday this year also may make it easier for the rally to slip away.

"It's hard to say if it's going to materialize. It's easy for traders to take a whole week off and spend it on vacation," Charles Rotblut, senior market analyst at Zacks Investment Research, said.

U.S. stock markets will close Monday for Christmas.

The economic data that could help guide investors next week are loaded on the backend of the shortened week. A report on November new home sales is due Thursday, and Friday brings Chicago PMI, a report on business activity in the Midwest in December.

A report released this week showed a slump in business activity in the Mid-Atlantic region. That Philly Fed survey sparked worries about the health of the economy that could carry over to next week.

But as the year draws to a close, some analysts still have hopes for a rally. "Don't give up hope on Santa Claus too quickly," said Alfred Goldman, chief market strategist at A.G. Edwards. "My guess is the market is going to do better between now and year-end," he said.

For the last full trading week of the year, the Dow lost about 0.8 percent, the S&P 500 fell 1.1 percent and the Nasdaq tumbled 2.3 percent.

Stocks slid after a report showing a surprise decline in durable goods orders overshadowed a tame inflation reading.

The Commerce Department said orders for big-ticket items rose 1.9 percent in November. But excluding transportation, orders tumbled 1.1 percent.

The unexpected decline overshadowed a separate report offering a mild reading on inflation.

The inflation gauge of the Commerce Department's report on personal income and spending, known as the core PCE, was flat in December. (Full story)

Also on the economic front, the University of Michigan issued a final reading for its consumer sentiment index that showed confidence remained high in December. The reading is considered an indicator of consumer spending, which fuels about two-thirds of the nation's economic activity.

Volatility was high ahead of the holiday weekend. The CBOE Volatility index (up $0.83 to $11.36, Charts) climbed 7 percent.

On the blue-chip Dow, all 30 stocks declined.

Elsewhere, Rupert Murdoch's News Corp. (Charts) agreed to exchange its controlling stake in DirecTV Group (Charts), along with other assets and cash, for Liberty Media's $11 billion stake in News Corp. Liberty (up $4.21 to $97.87, Charts) shares jumped almost 5 percent.

A slew of tech companies moved after posting quarterly earnings late Thursday.

Micron Technology (up $0.45 to $13.94, Charts) gained 3 percent after the company's profit tripled in the latest quarter.

Software company Red Hat (up $4.50 to $22.46, Charts) surged 23 percent after reporting upbeat earnings and issuing a robust forecast.

Qualcomm (down $0.73 to $37.81, Charts), a provider of microchips for mobile telephones, slipped 1 percent. The company lowered its quarterly profit outlook.

BlackBerry maker Research In Motion's (down $3.70 to $130.00, Charts) reported upbeat quarterly results and raised its guidance. But shares dipped along with the broad decline in tech stocks.

Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by a margin of 5 to 3 on volume of 986 million shares. On the Nasdaq, losers beat winners by a margin of 3 to 2 as 1.33 billion shares changed hands.

U.S. light crude oil for February delivery fell 25 cents to settle at $62.41 a barrel on the New York Mercantile Exchange, extending Thursday's more than $1 decline.

Treasury prices fell, raising the yield on the benchmark 10-year note to 4.62 percent from 4.54 percent late Thursday. Bond prices and yields move in opposite directions.

The dollar rose against the euro and the yen.

COMEX gold added 70 cents to $622.30 an ounce.

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