NEW YORK – Stocks ended barely changed Monday as investors paused after a three-day rally last week, with interest rates and a weakening dollar gaining focus now that the presidential election is over.
The Dow Jones industrial average (search) ended up 3.77 points, or 0.04 percent, to end at 10,391.31, based on the latest data. The Standard & Poor's 500 Index (search) fell 1.28 points, or 0.11 percent, to close at 1,164.89. The technology-laced Nasdaq Composite Index (search) edged up just 0.31 of a point, or 0.02 percent, to finish at 2,039.25.
With the major indexes up between 6 percent and 7 percent since Oct. 25, analysts said a selloff was expected, though the market's earnings and economic fundamentals remained sound.
"Today's profit-taking is based on a number of concerns," said Hugh Johnson, chief investment officer at First Albany Corp., Albany, N.Y. "The most important concern is valuation... the market is now arguably fairly valued to being modestly over valued. It is inviting some profit-taking.
Pfizer Inc. (PFE) weighed on the Dow and the S&P 500 after the drug company said it is talking with regulators over changing the label of its Bextra arthritis drug to warn of a potentially deadly skin reaction. Pfizer was down about 2.4 percent at $28.10.
Some investors were hedging against an anticipated hike in benchmark interest rates following Wednesday's Federal Reserve (search) meeting. The Fed's rate-setting body, the Federal Open Market Committee (search), meets Wednesday to decide on the latest expected increase in the benchmark federal funds rate, forecast by most economists to go up a quarter percentage point to 2 percent. It would be the fourth rate increase this year.
Raising rates is usually considered bad for stocks, in part because it raises borrowing costs for companies and consumers.
Crude futures tumbled as investors, reassured by last week's oil inventory figures, grew more confident that the United States would have enough heating oil for the winter. A barrel of light crude was quoted at $49.09, down 52 cents, on the New York Mercantile Exchange (search).
Investors will keep a close watch on the dollar after the currency hit a fresh record low against the euro and a nine-year low on a trade-weighted index on Monday as investors continued to shun the greenback on worries over the United States's bloated deficits. A prolonged decline of the dollar could deter foreign investors.
A number of stocks were pressured by fresh disclosures of government investigations. According to media reports, the Securities and Exchange Commission (search) is probing trading practices at brokerages including Morgan Stanley (MWD), Merrill Lynch & Co. (MER) and Charles Schwab Corp. (SCH), believing that the brokerages processed trades to benefit themselves rather than their clients. Morgan Stanley dropped 92 cents to $52.83, Merrill Lynch lost 51 cents at $55.91 and Schwab fell 9 cents to $9.63.
H&R Block Inc. (HRB) gained 17 cents to $49.54 despite news that securities regulator NASD has charged Block with fraudulently promoting Enron Corp. bonds shortly before the energy firm declared bankruptcy.
Microsoft Corp. (MSFT) rose slightly after Novell Inc. (NOVL) said it had reached a settlement with Microsoft over antitrust issues in which Microsoft will pay it $536 million in cash. Microsoft slipped 6 to $29.25, while Novell rose 65 cents to $7.51.
Investors were encouraged by McDonald's Corp.'s (MCD) sales report for October, which saw a 7 percent increase in fast food outlets open at least a year. McDonald's gained 21 cents to $30.27.
Taser International Inc. (TASR) surged $7.66, or 16.5 percent, to $54.15 after the Transportation Safety Administration approved the company's non-lethal stun weapons for use by air marshals on commercial aircraft.
The Russell 2000 index of smaller companies closed down 2.21, or 0.37 percent, at 602.08.
Overseas, Japan's Nikkei stock average fell 0.7 percent. In Europe, Britain's FTSE 100 closed down 0.49 percent, Germany's DAX index gained 0.13 percent for the session, and France's CAC-40 slippped 0.11 percent.
Reuters and the Associated Press contributed to this report.