NEW YORK (CNN/Money) - U.S. stocks hit a bout of profit taking Monday, muting gains on the Dow and pulling the Nasdaq to a lower close, despite some strength in biotechs and a better-than-expected report on manufacturing.

The Dow Jones industrial average (up 47.55 to 8897.81, Charts) rose about 0.5 percent, slipping off highs of the day that were more than double that amount, but still ending the day at its highest point in more than five months. Near midday, the index briefly touched 9,000, a level it has not closed above since Aug. 22, 2002, when it registered 9,053.

Meanwhile the Nasdaq composite (down 5.16 to 1590.75, Charts) retreated 0.3 percent. But with 2.51 billion shares traded, it enjoyed its highest trading volume so far this year. The S&P 500 index (up 3.41 to 967.00, Charts) closed about 0.4 percent higher, its highest point in more than nine months.

The market has rallied for more than two months now, on the belief that the U.S. economy will rebound in the second half of the year. The Nasdaq toyed with a 52-week high throughout the day and the S&P 500 was within range of its July 8 peak. But a bout of profit-taking hit in the last hour of the session.

Much of the morning's rally stemmed from the latest economic report that was seen as half-full. The Institute for Supply Management's index of national manufacturing activity rose to 49.4 in May from 45.4 in April. The reading, although better than expected, was still short of the 50 level that indicates expansion in the sector.

The report fed investors' hopes that an economic recovery has begun, and that stocks may be able to finally sustain a rally after several failed attempts in the past year. Traders have said it will take a continuous flow of positive economic news, including signs of falling unemployment, to get more individual investors back into the market.

"As the market continues to go up, people are going to get more bullish," said Jack Baker, head of equities at Putnam Lovell Securities.

There's little in the way of economic news set for Tuesday, but investors will be looking for data on auto sales for May, which are expected to be flat with April's annualized sales rate of 5.4 million.

IBM (IBM: down $0.71 to $87.33, Research, Estimates) also could take center stage Tuesday. The world's largest computer maker said, after the closing bell Monday, it is being investigated by the Securities and Exchange Commission. The SEC is looking for information regarding revenue recognition pertaining to certain customer transactions in 2000 and 2001, the company said.

In other corporate news, Cablevision (CVC: up $2.43 to $21.79, Research, Estimates) said after the close that it would spin off its satellite service, Rainbow DBS, and its Clearview Cinemas theater chain in an effort to focus on its entertainment and cable operations.

Biotech stocks have been among the leaders in the current bull run, and the sector scored steep advances Monday following reports of the success of several cancer drugs.

ImClone (IMCLE: up $5.00 to $33.50, Research, Estimates) surged 17.5 percent on news that its Erbitux treatment for colon cancer showed similar results in tests in Europe to the company's initial trial. Lack of clear data caused a Food and Drug Administration rejection of the drug application in December 2001 that was followed by an insider trading scandal and the ousting of CEO Sam Waksal.

Genentech (DNA: up $4.12 to $66.73, Research, Estimates) climbed 6.6 percent after its own experimental colon cancer treatment, Avastin, also showed promising results. All the new drug data were released over the weekend at the annual meeting of the American Society of Clinical Oncology.

Others in the sector also clocked significant gains, with Protein Design Labs (PDLI: up $1.33 to $15.50, Research, Estimates) jumping 9.4 percent, Millennium Pharmaceuticals (MLMN: Research, Estimates) rising 2.7 percent, and Affymetrix (AFFX: up $0.74 to $23.49, Research, Estimates) up 3.3 percent. The biotech index rose 1.3 percent.

Elsewhere, takeover news propelled the stock of application software maker J.D. Edwards (JDEC: up $0.78 to $12.59, Research, Estimates) 6.6 percent higher. Bigger rival PeopleSoft (PSFT: down $1.42 to $14.97, Research, Estimates) is to buy the company for $1.7 billion in stock.

Media shares also made gains in morning trading after the Federal Communication Commission voted to deregulate media ownership rules. Shares of Walt Disney (DIS: up $0.42 to $20.07, Research, Estimates) gained 2.2 percent, while AOL Time Warner (AOL: up $0.22 to $15.44, Research, Estimates), the parent of CNN/Money, rose 1.5 percent, and General Electric (GE: up $0.30 to $29.00, Research, Estimates) rose 1.1 percent.

Bond yields moved higher. The 10-year Treasury note lost 14/32 of a point in price, its yield climbing to 3.42 percent.

The dollar weakened against the euro, despite President Bush's words of support for a stronger greenback over the weekend, which contradicted Treasury Secretary John Snow's remarks just two weeks ago that a weaker dollar was good for exports. The U.S. currency also sank against the yen.

European stock markets closed the day higher, and stocks in Asia advanced overnight.

Oil and gold prices rose as well. Light crude futures for July delivery gained $1.15 to $30.71 a barrel in New York. Gold for August delivery rose $1.50 to $367.10 an ounce in New York.