Stocks give up gains

NEW YORK (CNNMoney.com) -- Stocks gave up early gains Monday afternoon, as investors struggled to sustain an advance following last week's big Federal Reserve-inspired rally and ahead of a string of key economic reports due later in the week.

Blue chips were hit by concerns about component General Motors, hit by a nationwide strike, and AMR, which issued a profit warning late Friday.

The Dow Jones industrial average (Charts) added a few points with 2-1/2 hours left in the session, giving up bigger morning gains, while the broader S&P 500 (Charts) index was little changed. The tech-fueled Nasdaq composite (Charts) added 0.4 percent.

All three major gauges added at least 2.7 percent last week as investors hailed the Federal Reserve's decision to cut a key short-term interest rate for the first time in four years.

That goodwill should continue to put a floor under stock indexes for the time being, limiting any selloff, although for how long is unclear.

"Clearly, the Fed has put people at ease, but I think it's a temporary fix," said Robert Loest, portfolio manager at Integrity Funds.

He said that while the stock market is currently experiencing a broader uptrend, worries about subprime mortgages, housing and the economy continue to rattle the credit markets.

As a result, the next big piece of negative news to come out could revive worries in stock markets too.

Investors will be looking to the economic news later this week for short-term direction. Reports are due on consumer confidence, housing, durable goods orders and personal income and spending.

Federal Reserve Chairman Ben Bernanke was speaking Monday afternoon at an education summit in Washington, but his prepared remarks did not address current monetary policy or the central bank's economic outlook.

GM (Charts, Fortune 500) stock was active after the United Auto Workers' union launched a nationwide strike against the company, saying key issues in contract talks could not be resolved. However, union leaders said they were willing to resume talk in the afternoon, a few hours after the strike began.

GM stock had risen as much as 3 percent in the morning, but gave up most of those gains by the afternoon as investors questioned how quickly the disputes could be resolved.

However, GM's problems are not likely to provide a big drag on broader markets, Loest said, since the problems in the industry are widely known.

AMR (Charts, Fortune 500) slumped 11 percent after warning late Friday that third-quarter profit results won't meet estimates. The stock dragged on other airline issues.

Also on the downside, Sonus Pharmaceuticals (Charts) plunged 83 percent in active Nasdaq trading after the company said a late-stage trial of its breast cancer treatment failed and it was giving up development of the drug.

A variety of bank, broker and homebuilder stocks slipped.

Among stock gainers, Dow component Microsoft (Charts, Fortune 500) jumped 2.5 percent ahead of the launch of its highly-anticipated Halo 3 video game at midnight.

EMC (Charts, Fortune 500) rose 7 percent in active trading after Citigroup upgraded the computer data storage maker to "buy" from "hold." Citigroup pointed to recent strong earnings and the outlook for VMware, the maker of virtualization software that EMC spun off last month but still holds a big stake in.

Separately, Citigroup initiated coverage of VMware (Charts) with a "buy" and a $100 price target.

Other tech gainers included Apple (Charts, Fortune 500), which rose after Citigroup boosted its price target and earnings forecast for fiscal-year 2008 and 2009.

Market breadth was negative. On the New York Stock Exchange, losers beat winners 9 to 7 on volume of 740 million shares. On the Nasdaq, decliners topped advancers 3 to 2 as 1.13 billion shares changed hands.

Treasury prices were little changed, erasing morning losses. The yield on the 10-year note stood at 4.62 percent, unchanged from late Friday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell to a new record low against the euro and also slipped against the yen.

U.S. light crude oil for November delivery lost 12 cents to $81.50 a barrel on the New York Mercantile Exchange.

Last week, the October contract settled at a record high of $83.32. However, the record price remains below inflation-adjusted highs hit in the early 1980s, which would be equal to at least $95 a barrel today.

COMEX gold for December delivery rose 10 cents to $739 an ounce.