Stocks ease amid worries

Stocks retreated Monday, taking a break from last week’s big advances, as financial shares fell amid concerns that the credit markets might not loosen up despite a big rate cut by the Federal Reserve.

Home builder shares also fell Monday, while technology stocks fared better.

Stocks were in positive territory in most of the first half of the session but began to give up their gains after the International Monetary Fund warned that the credit upheaval affecting international financial markets probably would be protracted and would damp growth of the global economy. The financial sector also weakened after Reuters reported that Deutsche Bank might have to write down a portion of its loan portfolio.

General Motors shares fell after the United Auto Workers began its first nationwide strike in 30 years.

The stock market’s pullback followed gains last week of more than 2.5% in the major stock market averages.

“I think you’re seeing some profit taking after last week’s rally,” said Scott Fullman, director of investment strategy at Israel A. Englander & Co.

The Dow Jones industrials fell 61.13 points, or 0.4%, to 13,759.06. The Standard & Poor’s 500 index declined 8.02 points, or 0.5%, to 1,517.73, while the Nasdaq composite index lost 3.27 points, or 0.1%, to 2,667.95.

The Russell 2,000 index of smaller companies fell 7.31 points, or 0.9%, to 805.80.

Declining issues beat out advancers 5 to 3 on the New York Stock Exchange.

Treasury bond yields were little changed. The yield on the 10-year Treasury note, which has risen since last week’s rate cut as investors moved back into stocks, edged up Monday to 4.63% from 4.62% late Friday.

The dollar fell against major currencies, hitting a fresh low against the euro, and gold rose.

Oil prices fell as a tropical depression in the Gulf of Mexico dissipated without causing damage to key oil and gas infrastructure. Crude futures settled down 67 cents at $80.95 on the New York Mercantile Exchange.

There were no major economic reports Monday. However, Dallas Fed President Richard Fisher said a downturn in inflation gave the central bank “some wiggle room” to further cut interest rates. Fed Chairman Ben S. Bernanke gave a speech on education that didn’t touch on economic issues.

Among the day’s market highlights:

Financial issues suffered another bout of selling.

Countrywide Financial fell $1.22 to $18.39. Most of the decline occurred late in the session, after the Calabasas-based mortgage giant said it expected to modify the terms of nearly 25,000 home loans this year to help borrowers stay in their homes. The company didn’t indicate what the modifications would cost.

Among other lenders, FirstFed Financial dropped $1.68 to $53.62, Downey Financial sank $1.47 to $59.42 and Washington Mutual was down $1.16 to $35.63.

In the brokerage sector, Morgan Stanley fell $2.15 to $62.29, Bear Stearns lost $4.33 to $112.99, Merrill Lynch eased $1.05 to $73.68, Citigroup fell 92 cents, or 1.9%, to $46.59 and JPMorgan Chase declined 79 cents, or 1.7%, to $46.34.

Home builders’ shares also sank anew. Lennar, which is due to report earnings today, fell $1.14 to $24.18, Hovnanian slid $1.30 to $11, KB Home lost $1.53 to $25.74, Meritage Homes was off $1.51 to $15.15, Pulte Homes ended down $1.06 to $15.10, and D.R. Horton fell 54 cents to $13.56.

The Dow Jones transportation index slumped 1.2%, pulled down by a sell-off in airline stocks after analysts slashed 2007 earnings estimates for AMR, parent of American Airlines. AMR on Friday issued a disappointing revenue forecast for the current quarter.

AMR plunged $3.49 to $20.77, Continental slumped $2.24 to $30.46 and UAL dropped $2.78 to $43.23.

The tech sector got support from Google and Apple, both of which closed at record highs on optimism about profit growth. Google rose $7.92 to $568.02; Apple advanced $4.13 to $148.28.

Dell rose 11 cents to $27.87 after saying it would sell computers through China’s biggest chain of electronics stores. The deal extends Dell’s strategy of expanding beyond its traditional Internet-and-phone sales model to better compete with rivals.

Gold mining stocks, which soared last week, were mixed even as the metal itself edged higher. Near-term futures in New York added 70 cents to $732.10 an ounce, near a 27-year high. Newmont Mining rose 70 cents to $48.26, but Agnico Eagle fell 80 cents to $49.01 and Yamana Gold slid 44 cents to $12.17.

GM fell 20 cents to $34.74 after thousands of UAW workers walked off the job as talks between the union and the automaker remained stymied, mainly over the issue of job security.

Ford Motor shares rose 25 cents, or 3%, to $8.48 after Chief Executive Alan Mullaly said the automaker was in talks with potential buyers of the company’s Jaguar and Land Rover brands.

Overseas, key stock indexes rose 0.1% in Britain and 2.7% in Hong Kong.

Shares fell 0.1% in Germany and France. Japan’s market was closed for a holiday.