Stocks in year-end malaise

NEW YORK (CNNMoney.com) -- Stocks continued to decline Monday, halfway through the last trading day of the year, as investors dress their portfolios for the year's end.

The Dow Jones industrial average (INDU) and the broader S&P 500 (SPX.X) were both down nearly 0.7 percent about 2-1/2 hours into the session. The tech-laden Nasdaq (COMPX) lost nearly 0.9 percent.

Trading is expected to be light Monday as investors try to close out the year on a positive note. Bond markets will close early, at 2 p.m. ET.

"People are looking at last-minute positions," said Dean Barber, president of Barber Financial Group.

"Some financials and real estate companies are being sold on profit taking, and some people are looking to take losses for tax purposes," he added.

Overall, Barber thinks Wall Street has weathered this year's challenges well, and that the the outlook for next year is positive, though there will still be some volatility.

For the year, major indexes have faired well despite problems in the housing and credit markets. Year-to-date, the Dow is about 7 percent higher, the S&P 500 is up about 4 percent, and the Nasdaq is up nearly 11 percent.

"Even though the numbers aren't astounding, signs point to a solid economy," he said.

On the housing front, the number of existing homes sold in November was essentially flat, according to the National Association of Realtors. The results were in line with Wall Street's expectations and did little to improve the negative outlook for the housing market.

Shares of homebuilder, DR Horton, (DHI, Fortune 500) were down more than 1 percent in mid-day trading. Other homebuilders, including Hovnanian Enterprises (HOV, Fortune 500) and Toll Brothers (TOL, Fortune 500), were also lower Monday morning.

From the banking sector, Merrill Lynch (MER, Fortune 500) could receive another infusion of capital from sovereign wealth funds, according to a British newspaper, The Observer.

Last week, Merrill said it was selling a $4.4 billion stake to Singapore's state-owned investment branch in an effort to shore up its capital position after taking huge subprime related writedowns in the company's third quarter.

Market breadth was negative. On the Dow, losers beat winners two to one on a volume of 352 million shares. On the Nasdaq, decliners topped advancers by more than two to one on a volume of 576 million shares.

U.S. light crude oil for January delivery fell 79 cents to $95.21 a barrel on the New York Mercantile Exchange.

Treasury prices rose, with the yield on the 10-year note falling to 4.01 percent, down from 4.07 on Friday. Bond prices and yields move in opposite directions.

In currency trading, the dollar gained slightly against the euro and lost ground versus the yen.

COMEX gold for February delivery fell $6.60 to $836.10 an ounce.