NEW YORK (CNNMoney.com) -- Stocks finished lower Monday, with the Dow industrials erasing a gain of as much as 143 points, as investors chose to be cautious after a recent advance and discounted China's move to strengthen its currency.
Stocks rallied in the morning, trimmed some gains in the early afternoon, and then slipped through the close.
"We were up over 100 this morning [on the Dow] on the China news, but again we're seeing the pattern that the trend reverses in the last hour or so," said Scott Armiger, portfolio manager at Christiana Bank & Trust Company. "The rallies don't hold, and the declines manage to recover."
He said this trend reflects the increased volatility that's been in markets lately but also the fact that stocks are pretty fairly valued at this point, relative to earnings expectations.
Stocks had risen for two weeks straight, with the major indexes all up more than 6%, as buyers returned following the May selloff. That selloff followed a roughly 80% rally on the S&P 500 off its March 2009 lows.
Worries that Europe's debt problems will slow down the global economic recovery dragged on stocks last month. Weaker-than-expected reports on housing, jobs and manufacturing added to the wariness.
But those worries have been set aside lately as investors scooped up shares beaten down in the recent rally. Market gains have also been driven by some supportive technical factors.
Investors got good news over the weekend when China said it will allow its currency, the yuan, to rise against the dollar, after it was pegged to the dollar over the last two years.
Freeing up the currency could be a boon to U.S. manufacturers and exporters, who suffered as the artificially low yuan made imports to China expensive.
However, China cautioned that the yuan's rise would happen only gradually.
On Monday, the dollar was barely changed versus the yuan and was 0.5% higher versus the yen. The euro barely budged versus the U.S. currency. The weak euro has been something of a proxy for investor worries about the economy over the last few months.
Amazon shares fell after the company cut the price of its Kindle electronic reader, the latest salvo in a pricing war that saw Barnes & Noble (BKS, Fortune 500) cut the price of its Nook earlier in the day.
Market breadth was negative. On the New York Stock Exchange, losers beat winners four to three on volume of 1.07 billion shares. On the Nasdaq, decliners beat advancers two to one on volume of 1.91 billion shares.
World markets: European markets rallied. Britain's FTSE 100 gained 0.9%, Germany's DAX rose 1.2% and France's CAC 40 climbed 1.3%.
Asian markets climbed. Japan's Nikkei advanced 2.4%, Hong Kong's Hang Seng rose 3.1%, and China's Shanghai Composite added 2.9%.
Commodities: U.S. light crude oil for July delivery rose 64 cents to settle at $77.82 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell $6.20 to $1,233.70 an ounce after closing at a record $1,258.30 on Friday.
Bonds: Treasury prices tumbled, raising the yield on the 10-year note to 3.24% from 3.22% late Friday. Treasury prices and yields move in opposite directions.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.84%||3.80%|
|15 yr fixed||2.95%||2.90%|
|30 yr refi||3.84%||3.81%|
|15 yr refi||3.01%||2.96%|
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