Stock gains peter out

Wall Street retreats after the Dow, S&P 500 and Nasdaq had surged to new 2009 highs.

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NEW YORK( -- Stocks struggled Monday, as investors turned cautious after pushing the Dow, S&P 500 and Nasdaq to new 2009 highs.

The Dow Jones industrial average (INDU) added 3 points, or less than 0.1%. The S&P 500 (SPX) index lost less than one point. The Nasdaq composite (COMP) lost 3 points, or 0.1%.

All three major gauges had risen soundly through the early afternoon, with rising oil prices and continued economic optimism lifting the market. But the gains dissolved in the afternoon, with only the energy sector remaining buoyant.

"We've got a lot of economic news coming out later this week and I think people are kind of waiting to see if the reports confirm the economy is bottoming," said John Wilson, chief technical strategist at Morgan Keegan.

Standouts this week include a consumer confidence report Tuesday, housing reports Tuesday and Wednesday and the revised read on second-quarter GDP growth Thursday.

Crude oil prices touched a fresh 10-month high and lifted oil services stocks, including Dow components Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500). But big consumer names including Kraft Foods (KFT, Fortune 500), Coca-Cola (KO, Fortune 500) and Home Depot (HD, Fortune 500) all declined.

Stocks rallied Friday after Fed chief Ben Bernanke said the economy is near a recovery and existing home sales posted their biggest jump in two years. That sent the Dow to its highest close since Nov. 4, the S&P 500 to its highest close since Oct. 6 and the Nasdaq to its highest close since Oct. 1.

Stocks have had a surprisingly upbeat summer, as investors have welcomed a number of better-than-expected quarterly results and economic reports.

The S&P 500 is up 52% from the March 9 lows, as of Friday's close. And the Dow is up 45% during that same time period. After a run of that magnitude in such a short period of time, many analysts predict that stocks are due for a pullback, perhaps by as much as 15%. However, the momentum remains up, and with historically high amounts of cash held in mutual funds, the advance doesn't appear to be flagging.

"A lot of people didn't get in at the March lows and there's still a lot of buying interest out there," Wilson said. "We could see a number of 3 to 5% corrections, but I think people will use them to get back in."

Company news: Advanced Micro Devices (AMD, Fortune 500) gained 8% after Citigroup upgraded the chipmaker to "buy" from "hold." The brokerage said that while AMD is struggling now, its businesses are starting to stabilize.

Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) shares both surged on economic optimism and in reaction to Friday news that the Federal Reserve bought $5.6 billion of Fannie, Freddie and Federal Home Loan Bank debt.

Nokia (NOK) is planning to expand its traditional cell phone business by introducing a mini-laptop early next month. The Nokia Booklet 3G will use Microsoft's Windows software.

Dow component Procter & Gamble (PG, Fortune 500) said its selling its pharmaceuticals business to drugmaker Warner Chilcott (WCRX) for $3.1 billion. P&G shares were little changed, while Warner Chilcott shares surged 27%.

Market breadth was mixed. On the New York Stock Exchange, winners narrowly edged losers on volume of 1.23 billion shares. On the Nasdaq, decliners topped advancers seven to six on volume of 2.06 billion shares.

This last week of summer is expected to bring low trading volume as market pros head out on vacation or hold off on making any big changes in their portfolios until the fall.

World markets: Global markets followed the lead of U.S. markets Friday. Asian markets advanced, with the Japanese Nikkei rising 3.4%. European markets rallied.

Oil: U.S. light crude oil for October delivery rose 48 cents to settle at $74.37 a barrel on the New York Mercantile Exchange, a 10-month high.

Bonds: Treasury prices rallied at the start of a week that brings over $100 billion in government debt auctions. The rise in prices lowered the yield on the benchmark 10-year note to 3.48% from 3.56% Friday. Treasury prices and yields move in opposite directions.

Other markets: COMEX gold for December delivery fell $11.10 to settle at $943.60 an ounce.

In currency trading, the dollar fell versus the euro and gained against the Japanese yen.

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