Blue Chips Finish Lower

Major indexes weakened Monday as investors took profits from Friday's rally

Major U.S. stock indexes closed lower Monday, depressed by profit taking after Friday's stock market rally in the first session of the New Year. But the broader market rose on strength in automakers, homebuilders, and energy producers, sparked by a better than expected report on November construction spending and news that President-elect Barack Obama plans $300 billion in tax cuts for individuals and businesses.

On Monday, the 30-stock Dow Jones industrial average finished lower by 81.80 points, or 0.91%, at 8,952.89. The blue-chip benchmark was weighed down by weakness in components AT&T (T) and Verizon Communications (VZ) following an analyst downgrade of their shares.

The broader S&P 500 index fell 4.35 points, or 0.47%, to 927.45. The tech-heavy Nasdaq composite index shed 4.18 points, or 0.26%, to 1,628.03.

But activity in the broader market was positive. On the New York Stock Exchange, 21 stocks rose in price for every 10 that fell. The ratio on the Nasdaq was 15-13 positive.

Automakers closed out their worst year in the last 15 years by reporting dismal December sales. General Motors (GM) reported a December sales decline of 31%, year-over-year, which was somewhat better than expected. Ford Motor Co. (F) reported sales down 32% from a year earlier and Honda (HM) reported a 35% drop. Chrysler reported December sales plunged 53%, year-over-year.

The grim numbers underscore how matters went from bad to worse in 2008 for auto makers as jittery consumers stayed out of showrooms. Little improvement, if any, is expected this year. The entire industry, including Japan's Toyota and Honda, is now reeling from the spiraling effects of the U.S. housing crisis, tight credit and worries about a lengthy recession.

Nonetheless, shares of GM and Ford advanced in Monday's session.

The U.S. dollar index was solidly higher on reports that the European Central Bank and Bank of England were on the verge of cutting interest rates. Bonds were sharply lower amid worries the U.S. Treasury will have to borrow heavily this year.

Oil stocks were higher in conjunction with a rise in crude oil futures. Gold futures were lower.

In economic news Monday, U.S. construction spending fell 0.6% in November from a 0.4% decline in October (upwardly revised from -1.2% before). September was also revised higher. The data are much better than the 1.2% drop that markets feared. Sales are down 3.3% over last November. Residential construction spending declined 4.1% from the preceding month and is down 22.8% year-over-year. Nonresidential spending rose 1.0% from October and is up 9.2% year-over-year. Private spending fell 1.5% month-over-month and is down 7.4% over last November. Public spending rose 1.4% and is up 7.9% year-over-year.

"While only one month of data, the construction report was better than expected, to give markets some good news entering into 2009," says S&P senior economist Beth Ann Bovino.

On Tuesday, the market will get reports on November factory Orders and January's ISM nonmanufacturing index.