Stocks slide as investors weigh concerns about credit

NEW YORK -- Wall Street gave up a modest advance Monday to trade lower as concerns about a weakening credit market unraveled some enthusiasm over reports of strong electronics sales over the holiday weekend.

The New York Federal Reserve, acknowledging "heightened pressures" in money markets that are expected to last through the rest of the year, said it plans to conduct a series of term repurchase agreements aimed at boosting liquidity in the credit markets. The New York Fed, which carries out monetary policy set by the U.S. Federal Reserve, said it would inject $8 billion to the banking system on Wednesday.

Meanwhile, banks showed more signs of having been hurt by credit market problems. Citigroup Inc. warned it is looking to cut costs -- raising the possibility of further job cuts -- and HSBC Holdings PLC said it plans to bail out two funds it manages. To do so, Europe's largest bank plans to move about $45 billion of the fund's assets onto its balance sheet.

A better-than-expected report on retail sales wasn't able to hold the market's gains. Retail sales on Friday and Saturday combined rose 7.2 percent to $16.4 billion from the same two-day period a year ago, according to ShopperTrak, which tracks total sales at more than 50,000 U.S. retail outlets. That's helped ease investor concerns about consumer spending, which accounts for two-thirds of all economic activity.

"It seems that the market is doing what it knows best in times of uncertainty and that is fluctuating, said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "I suspect that this is going to be the trend that we're going to see over the next week or so as we await economic data."

In late morning trading, the Dow Jones industrial average fell 39.59, or 0.30 percent, to 12,941.29.

Broader stock indicators fell. The Standard & Poor's 500 index declined 9.09, or 0.63 percent, to 1,431.61, and the Nasdaq composite index fell 16.36, or 0.63 percent, to 2,580.24.

Last week, the Dow lost 1.49 percent, the S&P slid 1.24 percent and the Nasdaq gave up 1.54 percent.

Government bond prices showed little change. The yield on the 10-year Treasury note, which moves opposite its price, was flat at 4 percent from late Friday.

With energy prices at the highest in decades, and economic uncertainty looming over the market, investors have been nervous that consumers could cut back during the holidays.

Energy prices fluctuated in early trading. A barrel of light, sweet crude fell 90 cents to $97.28 on the New York Mercantile Exchange, after briefly crossing $99 overnight.

Gold prices rose, while the dollar fell against other major currencies.

Economic news was expected to be light Monday, with traders looking ahead to the readings on consumer confidence, existing home sales and orders for big-ticket goods due later in the week.

"The early focus was on the consumer and the weekend sales but of course subprime always seems to pop its head up," Cardillo said, referring to loans made to borrowers with poor credit. Some of these loans are now going bad, forcing banks to write off huge sums.

In Europe, embattled mortgage lender Northern Rock PLC said Monday it will hold accelerated takeover negotiations with a consortium led by Virgin Group. Northern Rock ran into problems in September when the short-term credit on which it relied dried up as banks became more wary of lending, and the Bank of England stepped in as a lender of last resort.

Among financial stocks, Citigroup fell 78 cents, or 2.5 percent, to $30.92, while Lehman Brothers Holdings Inc. fell $1.66, or 2.7 percent, to $59.20.

Some retailers showed gains. Garmin Ltd. jumped $6.68, or 7.3 percent, to $98.54 after a Deutsche Bank analyst said the company's navigation gadgets were a popular buy in early holiday shopping.

Apple Inc. also rose, advancing $2.10 to $173.64. Best Buy Co. rose 89 cents to $48.91.

Boeing Co., which like Citigroup is one of the 30 stocks that comprise the Dow industrials, rose $2.10, or 2.3 percent, to $91.64 after an analyst upgraded shares of the airplane maker citing long-term gains driven by growth in air travel worldwide.

Weighing somewhat on the market's optimism, Citigroup reduced its outlook on several major homebuilders on Monday, saying a glut of inventory and coming resets of subprime mortgages will continue to weigh on the sector at least through the second quarter of 2008.

Lennar Corp. fell 57 cents, or 3.7 percent, to $15.02, while KB Home fell 89 cents, or 4.1 percent, to $20.80.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 413.4 million shares.

The Russell 2000 index of smaller companies fell 8.08, or 1.07 percent, to 746.95.

Overseas, Britain's FTSE 100 fell 0.87 percent, Germany's DAX index lost 0.50 percent and France's CAC-40 dipped 1.20 percent. In Asia, Japan's Nikkei stock average closed up 1.66 percent, Hong Kong's Hang Seng index gained 4.09 percent.