Stocks slip after rally

NEW YORK (CNNMoney.com) -- Stocks struggled Monday afternoon as investors took a step back after last week's rally and prepared for the first batch of quarterly earnings reports, due later this week.

Trading volume was weak and the treasury bond market was closed due to the Columbus Day holiday.

The Dow Jones industrial average (Charts) lost 0.3 percent about 2-1/2 hours into the session. On Friday, the Dow hit an all-time intraday high before ending just short of a new record close.

The broader S&P 500 (Charts) index lost 0.5 percent after hitting record intraday and closing highs on Friday.

The tech-heavy Nasdaq composite (Charts) lost a few points, after ending at a more than 6-1/2 year high on Friday.

"It's a semi-holiday, with the bond market being closed, and investors are feeling a bit cautious ahead of the earnings, so we're seeing some weakness today," said Peter Cardillo, chief market economist at Avalon Partners.

Stocks had risen Friday after a strong jobs report raised bets that the economy will be able to avoid a recession, despite the impact of the housing and mortgage market meltdown.

This week the focus is on third-quarter earnings, with two Dow components set to get the ball rolling. Alcoa (Charts, Fortune 500) reports Tuesday and GE (Charts, Fortune 500) on Friday. However, a bigger batch of reports doesn't arrive until later in the month.

Trucking company Ryder Systems (Charts, Fortune 500) warned that third-quarter earnings won't meet estimates, due to the impact from the economic slowdown. (Full story)

That sent a variety of trucking and other transportation stocks lower, with the Dow Jones Transportation (Charts) average falling 1.6 percent.

In corporate news, SAP (Charts) has agreed to buy fellow business software maker Business Objects (Charts) for $6.8 billion in cash.

Textron (Charts, Fortune 500) said it was buying United Industrial (Charts), a maker of aerospace and defense systems, for $1.1 billion in cash.

Merrill Lynch (Charts, Fortune 500) slumped on a pair of analyst downgrades, according to Briefing.com. Last Friday, the company warned it would post a quarterly loss and take a big charge due to the credit and mortgage market turmoil.

The cost of the subprime crisis is estimated to have already reached nearly $20 billion. (Full story).

JP Morgan Chase (Charts, Fortune 500) and Bank of America (Charts, Fortune 500) are likely to report around $3.1 billion in losses for the same reason, according to a Financial Times report that cited an analyst at Sanford Bernstein.

Trading volume was pretty light and expected to remain that way Monday due to the holiday.

On the New York Stock Exchange, losers topped winners two to one on volume of 500 million shares. On the Nasdaq, decliners beat advancers three to two on volume of 960 million shares.

The Treasury bond market was closed Monday due to the holiday.

U.S. light crude for November delivery fell $2.37 to $78.85 a barrel on the New York Mercantile Exchange.

In currency trading, the dollar rose against other major currencies.

The rising dollar sent gold and other dollar-traded commodities lower. COMEX gold for December delivery fell $8.60 to $738.60 an ounce.