NEW YORK - Wall Street's hopes of prolonging its year-end rally suffered another blow Monday as cautious traders sold off stocks and the technology sector posted a steep decline.
The market opened little changed but turned lower at midday despite a court victory for Pfizer Inc. and a multibillion acquisition by FPL Group Inc. Google Inc.'s investment in America Online and strong earnings from Circuit City Stores Inc. were unable to lift tech shares, which have slid sharply lower in recent days.
A lack of economic news left investors with limited guidance and made them anxious to take profits at any sign of a downturn on the market. Critical data on gross domestic product, housing and consumer spending later this week could determine if stocks make one final push higher before January.
Low trading volume is expected this week ahead of the holidays, said Rick Pendergraft, an equity trader at Schaeffer's Investment Research. He added that the market may still be holding back after the November rally pressured many to buy stocks.
"Traditionally, the week after Christmas is typically pretty strong," Pendergraft said. "But given how much we've run up since October, I don't know if you should expect the same kind of gains."
The Dow Jones industrial average dropped 39.06, or 0.36 percent, to 10,836.53, after spending most of the day in positive territory.
Broader stock indicators also finished lower. The Standard & Poor's 500 index sank 7.40, or 0.58 percent, to 1,259.92, and the Nasdaq composite index plunged 29.74, or 1.32 percent, to 2,222.74.
Bonds prices were flat, with the yield on the 10-year Treasury note unchanged at 4.44 percent from late Friday. The U.S. dollar was mixed against other major currencies, as gold prices inched higher.
Crude futures saw a second day of losses as warm weather persisted throughout the Northeast and reduced expectations for a spike in heating-fuel demand. A barrel of light crude fell 72 cents to settle at $57.34 on the New York Mercantile Exchange.
So far this month, Wall Street has seen a familiar pattern of whittling down early gains and finishing with losses as traders lock in short-term profits. Some investors held onto hopes that stocks might see one last runup after soaring to multiyear highs in late November, but several weeks of aimless trading have nearly zapped the market's momentum. Traders have been jumping at any chance to lock in gains for the year.
"For two, almost three weeks, people have been saying the market is too high," said Bill Groenveld, head trader for vFinance Investments. "They're looking for the pullback. At any point we start our way back, people say, 'Here's our pullback.'"
After logging early gains, Google was unable to revive the tech sector, falling $5.55 to $424.60, while AOL parent Time Warner Inc. lost 5 cents to $17.95. Microsoft Corp., which had been looking to strike a deal with Internet service provider AOL, fell 7 cents to $26.83.
FPL confirmed a deal to buy Constellation Energy Group Inc. for $11 billion, creating one of the biggest energy suppliers with $27 billion in yearly revenue. The stock swap values Constellation at a 15 percent premium. FPL sank 19 cents to $42.76, while Constellation lost $2.52 to $59.10.
A U.S. court ruled that Indian drug firm Ranbaxy Laboratories Ltd. infringed on Pfizer's patents for cholesterol reducer Lipitor, narrowing its chances to release of a generic version within the next five years. Pfizer climbed $1.74 to $24.32.
Pfizer's win sparked a flurry of buying elsewhere in the drug sector, with Johnson & Johnson shares adding 33 cents to $61.19 and Merck & Co. up $2.24 at $32.25. The American Stock Exchange pharmaceutical index surged 2.6 percent to 325.23.
In earnings news, Circuit City posted a better-than-expected profit last quarter, buoyed by strong television and Web sales. The retailer reversed a year-ago loss as sales swelled 15 percent. Circuit City rose $1.45 to $22.70.
Declining issues led advancers by about 8 to 3 on the New York Stock Exchange, where preliminary consolidated volume of 2.26 billion shares lagged the 2.71 billion shares that changed hands on Friday, when trading was unusually active due to options contract expirations.
The Russell 2000 index of smaller companies sank 10.84, or 1.59 percent, to 672.25.
Overseas, Japan's Nikkei stock average gained 1.44 percent. Britain's FTSE 100 climbed 0.15 percent, Germany's DAX index fell 0.07 percent, and France's CAC-40 was lower by 0.2 percent.