NEW YORK – Stocks headed lower Monday but managed to hold on to most of their recent gains as investors reacted relatively calmly to oil prices that approached $60 per barrel and a 1.6 percent decline in aircraft maker Boeing.
The Dow Jones industrial average (search) was down 13.96 points, or 0.13 percent, at 10,609.11. The Standard & Poor's 500 Index (search) was down 0.86 points, or 0.07 percent, at 1,216.10. The technology-laced Nasdaq Composite Index (search) was down 1.98 points, or 0.09 percent, at 2,088.13.
The Dow ended a 7-session streak of gains, while both Nasdaq and the S&P closed lower for the first time in 5 consecutive days.
"The market was knocked off its balance by oil prices and on top of that you had a Federal Reserve bank official say that they are not finished raising rates combined with a greater than expected decline in the leading indicators," said Jim Awad, chairman of Awad Asset Management.
Building on last week's gains, oil prices set an all-time high as worries about a winter fuel crunch stoked buying by hedge funds and forced OPEC to consider lifting supply quotas again. U.S. light crude climbed to a record for the second successive session, hitting $59.52 a barrel on the New York Mercantile Exchange (search ). July crude ended 90 cents higher at $59.37.
The concern over oil stymied hopes of continuing last week's stock advance, which saw the major indexes climb for five straight sessions. But Joseph Battipaglia, chief investment officer at Ryan Beck & Co., said investors — who have seen the risk of inflation dwindle and the economy remain on track — were handling the oil situation well.
"Everything else I see, aside from oil, is in place for a good run. Inflation issues have been pretty much satisfied, the Federal Reserve is on a glide path to stopping their interest rate increases. Everything else looks good," Battipaglia said. "Stocks aren't hugely cheap, but they're still cheap on a relative basis. So if we can get oil back down somewhat, we should be in good shape."
The Federal Reserve's measured pace of rate hikes of quarter percentage points is still appropriate and it would be premature to declare the strategy was near an end, Richmond Federal Reserve Bank President Jeffrey Lacker told reporters on the sidelines of a banking conference.
Meanwhile Boeing (BA), a component of the blue-chip Dow, fell 1.5 percent to $63.67 after Air Canada, a unit of ACE Aviation Holdings Inc., said it canceled a $6 billion order from the company.
EBay shares (EBAY) closed 2.1 percent lower at $37.24 on Nasdaq on concerns that Google Inc. may offer an "online wallet" service that rivals eBay's PayPal.
The bond market sold off on the oil concerns, with the yield on the 10-year Treasury note rising to 4.10 percent from 4.08 percent late Friday. The dollar made gains against most major currencies, and gold prices also rose.
The Conference Board's (search ) latest reading of the index of leading economic indicators showed that the economy could already be slowing faster than many investors expect. The index for May dropped 0.5 percent, more than the 0.3 percent drop Wall Street had expected. The index was unchanged in April.
"The leading indicators are just confirming what we're seeing in other indicators, that the economy is not falling off a cliff, but it is slowing," said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. "It's well documented, well discounted, but in a way it's good to see that confirmed."
Shares of Cablevision Systems Corp. (CVC) were up 23.9 percent before the bell, after the Dolan family, which owns 71 percent of the company's voting shares, made a $7.9 billion bid to take the enterprise private. That represented a 25 percent premium over the stock's $26.87 Friday close on the New York Stock Exchange. Cablevision surged 19.1 percent, or $5.13, to $32 per share.
Guidant Corp. (GDT) slipped 3 percent to $70.30 after Lazard Capital Markets cut its investment rating following the cardiovascular device maker's recall Friday of some of its implantable heart defibrillators.
According to reports from The Wall Street Journal and The New York Times, online broker Ameritrade Holding Corp. (AMTD) is close to acquiring rival TD Waterhouse from its parent, Toronto Dominion Bank. The Canadian company could take a sake in the combined online firm, the papers said. However, reports added that E-Trade Financial Corp. (ET) is still in merger talks with Ameritrade as well. Ameritrade dropped 42 cents to $14.59, while Toronto-Dominion climbed 29 cents to $43.35 and E-Trade shed 13 cents to $13.
Google Inc. (GOOG) rose $6.40 to $286.70 after media reports said the company plans to start an online payment system to rival eBay Inc.'s widely used PayPal service. EBay (EBAY) lost 81 cents to $37.24 as investors worried about the prospects of strong competition in an area currently dominated by PayPal.
Embattled automakers Ford Motor Co. (F) and rival General Motors Corp. (GM) saw their shares upgraded by Banc of America Securities to "neutral" from "sell." Analysts there said the possibility of health care concessions from the United Auto Workers (search ) would help the companies as they struggle to regain financial footing. Ford nonetheless slipped 17 cents to $11.11, while Dow component GM was up 14 cents at $35.82.
On the New York Stock Exchange, 1.27 billion shares changed hands, below the 1.46 billion daily average for last year. On Nasdaq, about 1.45 billion shares traded -- below the 1.81 billion daily average last year.
Decliners outpaced advancers on both the New York Stock Exchange and Nasdaq by about 1.4 to 1.
The Russell 2000 index of smaller companies was down 2.35, or 0.36 percent, at 641.84.
Overseas, Japan's Nikkei stock average fell 0.27 percent. In Europe, Britain's FTSE 100 closed down 0.11 percent, France's CAC-40 dropped 0.65 percent for the session, and Germany's DAX index lost 0.38 percent.
Reuters and the Associated Press contributed to this report.