Stocks: A Chilly Start to December

Indexes were unable to keep their four-day winning streak alive on Monday amid persistent worries about the economy, interest rates and housing

Stocks closed lower Monday as traders demonstrated a reluctance to push the market higher after last week's string of sharp gains. Uncertainties about the outlook for the economy, interest rates and housing are returning to haunt the market, amid worries about a big downgrade of debt sold by structured investment vehicles. Investors also weighed comments from officials on efforts to help the beleaguered housing sector and crude oil's recent drop below $90 per barrel.

On Monday, the Dow Jones industrial average ended lower by 57.15 points, or 0.43%, at 13,314.57. The broader S&P 500 index shed 8.72 points, or 0.59%, to 1,472.42. The tech-heavy Nasdaq composite index fell 23.83 points, or 0.9%, to 2,637.13.

Activity in the broader market was negative Monday. On the New York Stock Exchange, 19 shares declined in price for every 14 that advanced. Nasdaq breadth was 20-10 negative.

The S&P 500 and the Dow had moved higher four sessions in a row after a brutal November. At one point, the S&P 500 was down 9% since Nov. 1 before ending the month down 4.4%.

Moody's Investors Service is preparing the biggest credit rating cuts since subprime

mortgages contaminated the bond market back in August, reports Bloomberg, foreshadowing losses for investments that pay Florida teachers and money market funds. Moody's may lower ratings on $105 billion of debt sold by structured investment vehicles after the net asset values of 20 SIVs sponsored by firms including Citigroup (C) declined to 55% from 71% a month ago, Moody's said in a statement. The assets were valued at 102% in June.

Treasury Secretary Henry Paulson said the government and banks will "soon" announce a plan to keep subprime mortgage borrowers "with steady incomes and relatively clean payment histories" from losing their homes, according to a Bloomberg report. He proposed a plan that, if enacted by Congress, would let state and local governments "temporarily broaden their tax- exempt bond programs to include mortgage refinancings."

Meanwhile, Boston Federal Reserve Bank President Eric Rosengren called on the Federal Housing Administration to look for ways to "better meet borrowers' needs." "Our focus on the opportunities for the FHA program to play a role in alleviating this crisis does not represent advocating a government bailout of lenders, investors, or reckless borrowers," he said. "Rather, I am advocating using existing programs for what they were designed to do -- provide an option for low- and moderate-income borrowers to obtain financing at more affordable rates."

In economic news Monday, the U.S. ISM manufacturing index was 50.8 in November, about the same as the 50.9 reading in October and just over the 50.5 figure that markets had expected. The subcomponents of the report were mixed. Employment fell to 47.8 from 52.0, while new orders edged up to 52.6 from 52.5 and the production index rebounded to 51.9 from 49.6. Prices paid rose to 67.5 from 63.0. The release was about as expected, the fifth consecutive slip in the index may unnerve markets, says S&P Economics.

The market's main focus this week will be Friday's release of nonfarm payrolls for November, which could determine if and how much the Fed cuts rates next week.

January NYMEX crude oil futures overcame some earlier weakness and rose 60 cents to $89.31 per barrel Monday amid reports that ministers from the Organization of Petroleum Exporting Countries said the group may not need to raise output at a meeting this week because of adequate stockpiles.

Among the stocks in the news Monday, Activision (ATVI) will merge with Vivendi Games, the interactive entertainment business of Vivendi. Vivendi will buy new Activision shares for $27.50 per share, or $1.7 billion total. After closing the deal, the new Activision Blizzard will buy back $4 billion in shares.

Amgen (AMGN) was lower Monday after its Aranesp chemotherapy drug failed to show significant results over a control group in treating breast cancer patients.