Sluggish day, strong year

NEW YORK (CNNMoney.com) -- Stocks slipped modestly late Friday afternoon, at the end of an upbeat quarter and year on Wall Street.

The Dow Jones industrial average (down 14.82 to 12,486.70, Charts) lost 0.3 percent with around 30 minutes left in the session. The blue-chip barometer hit a record trading high on Thursday and a record closing high on Wednesday.

The broader S&P 500 (down 4.29 to 1,420.44, Charts) index and the Nasdaq (down 7.21 to 2,418.36, Charts) composite both lost around 0.5 percent.

With little corporate or economic news to focus on Friday, investors seemed content to hold on to gains through most of the session, before bailing out in the last half hour.

Markets will be closed Monday for New Year's Day and Tuesday for the national day of mourning for President Ford, marking a rare four-day closure for U.S. trading.

2006 is set to become the fourth year in a row that the S&P 500 and Nasdaq composite have posted gains. For the Dow, it will be the third of four years, after the blue-chip average fell slightly last year.

The 2006 stock market advance was the best since 2003, when the major gauges surged in a broad rally following a three-year bear market. The events of September 11, 2001 and the end of the late 1990s tech boom had led to a decline between 2000 and 2002. 2003 was the comeback year, with the Dow gaining 25 percent, the S&P 500 gaining 26 percent and the Nasdaq composite gaining 50 percent.

Stock gains in 2006 were less bombastic, but nonetheless far better than what many prognosticators were expecting.

Since bottoming in July, stocks have been on a tear, leaving the Dow up 16.7 percent this year as of Thursday's close, with the S&P 500 up just over 14 percent.

The Nasdaq composite has gained 10 percent, and the Russell 2000 (down 5.87 to 788.61, Charts) small-cap index has jumped 18 percent in 2006.

"The market is supposed to do well in the fourth quarter and that's exactly what it did," said Chris Johnson, chief executive officer at Johnson Research Group.

Johnson said the seasonal trend of a strong fourth quarter - typically the best of the year for stocks - was exacerbated this year as some investors jumped in after missing the market's surprise rally in August and September.

"The bottom in July caught some investors by surprise and they stayed on the sidelines initially," he said. "So in the fourth quarter, we saw investors chasing the market higher because they had missed out in the summer and early fall."

January could bring some weakness, analysts say, as investors that have held off taking profits on 2006 gains for tax reasons opt to sell some winners. In addition, the arrival of the new Congress in late January and the start of fourth-quarter earnings pre-announcements could all set markets up for a pullback.

Standard & Poor's currently expects fourth-quarter earnings to have grown 9.4 percent, marking the first quarter of earnings growth of less than 10 percent since the first quarter of 2002.

Yet longer term, the outlook for 2007 is more positive.

In Friday's market action, the latest development in the Apple stock options case helped Apple (up $3.95 to $84.82, Charts) stock rally. The company restated its earnings and acknowledged that options were wrongly dated but it said CEO Steve Jobs didn't benefit as a result. (Full story).

In other news, Marsh & McLennan (down $0.20 to $30.52, Charts) will sell its Putnam Investments unit to fellow financial firm Power Corp. of Canada for $3.9 billion, the Wall Street Journal reported.

AT&T (up $0.26 to $35.76, Charts) rose on news that it has offered concessions that should lead the way to winning approval of its $85 billion buyout of BellSouth (up $0.29 to $47.09, Charts).

Other Dow gainers included General Motors (up $0.25 to $30.87, Charts), the best-performing Dow stock of the year. (See chart for details.)

Market breadth was negative and volume was light. On the New York Stock Exchange, decliners beat advancers 5 to 3 as 670 million shares changed hands. On the Nasdaq, losers topped winners three to two on volume of around 1 billion shares.

Treasury prices slipped, raising the yield on the benchmark 10-year note to 4.70 percent from 4.68 percent late Thursday. Bond prices and yields move in opposite directions.

In currency trading, the dollar was little changed versus the yen and was lower versus the euro.

U.S. light crude oil for February delivery rose 52 cents to $61.05 a barrel on the New York Mercantile Exchange.

COMEX gold rose 20 cents to $637.10 an ounce.

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