Stocks fall as rally runs out of steam; Dow off 37

NEW YORK (AP) - Stocks pulled back Monday as traders retreated from a rally that brought indexes to their highest levels since the peak of the financial crisis in September 2008.

Gold crossed $1,400 an ounce to another record on Monday as traders looked for safe places to park money.

The Dow Jones industrial average fell 37.24, or 0.3 percent, to close at 11,406.84. It surged 2.9 percent last week after the Federal Reserved announced a $600 billion stimulus package for the U.S. economy.

The Standard and Poor's 500 index fell 2.60, or 0.2 percent, to 1,223.25.

The Nasdaq composite index continued to outperform other market measures, as it has done all year, edging up 1.07, or 0.04 percent, to 2,580.05. The technology-focused index is up 13.7 percent for the year, compared to a 9.4 percent gain for the Dow and a 9.7 gain for the S&P 500.

Financial companies were down the most among the 10 industry groups that make up the S&P 500 index. Technology, energy and materials companies were the only groups in the index to show meager gains.

"Today is shaping up to be a modest sell-off and that's to be expected," said Barnaby Levin, a managing director at HighTower Advisors.

Stocks have risen in recent weeks on better-than-expected corporate earnings reports and the introduction of a bond-buying program by the Federal Reserve that is intended to stimulate the economy by driving interest rates lower and encouraging spending.

The dollar rose 0.5 percent against a broad basket of currencies. That's a negative for big U.S. companies like Caterpillar Inc. that do a lot of business overseas, since a stronger dollar makes their products more expensive in other countries. Caterpillar was off 0.5 percent, and Boeing Co., another big exporter, was off 1.5 percent, putting it in a tie with Travelers Cos. for biggest laggard among the 30 companies that make up the Dow.

Despite weakness in other financial stocks, shares of Bank of America Corp. rose 1.9 to make it the best performing company among the Dow 30, followed by Hewlett Packard Co. and Cisco Systems Inc.

The euro fell 0.8 percent from recent highs, in part on renewed concerns about the debt burdens of the weaker economies among countries that use the Euro. Ireland announced Thursday that it would raise taxes and seek additional cuts in government services to rein in its deficit. Yields on 10-year Irish bonds rose sharply in response. U.S. markets had swooned this spring over concerns that a fiscal crisis in Greece would spread to Portugal, Spain and other weak economies in the euro zone.

Prices for Treasury bonds fell. The yield on the 10-year Treasury bond rose slightly to 2.55 percent, from 2.53 percent late Friday.

St. Louis Fed President James Bullard on Monday defended the central bank's stimulus program in a meeting at the New York Society of Security Analysts. Bullard said that the pace of economic recovery had slowed, which made deflation, rather than inflation, a greater concern for the Fed.

"U.S. policy should strive to avoid the possiblity of a Japanese-style deflation," he said.

Japan's economy has stalled since its stock market peaked in the early 1990s. In deflation, banks curtail lending, consumers drastically cut back on spending and corporations hoard cash out of fear that prices will continue to fall.

Traders will get a better indication of consumer spending later in the week when several major retailers announce earnings. Kohl's Corp., Macy's Inc. and J.C. Penny Co. Inc. will release their third-quarter reports starting Wednesday. Retailers such as The Gap Inc. and Macy's rose more than 8 percent last week on better-than-expected October sales that suggest that consumers will increase their spending this holiday season.

Leaders from the Group of 20 industrialized and developing nations will meet Thursday and Friday in Seoul. Tensions have risen in the group regarding trade imbalances and the respective strength of the Chinese yuan and the dollar.

Officials from several countries have criticized the Fed's bond-buying program amid concerns that it will spark asset bubbles in emerging economies. Representatives in Germany, Brazil, South Africa and China have voiced objections to the plan and argued that it could lead to a surge in commodity prices.

Precious metals rose as investors hedged their bets against inflation and sought out stable stores of value. Gold gained 0.4 percent to settle at $1,403.20 an ounce, its latest record, and silver jumped 2.6 percent to $27.432 an ounce.

Falling stocks narrowly outpaced rising ones on the New York Stock Exchange, where volume came to 4 billion shares.