By Jessica Wohl

(Reuters) – Target Corp cut its full-year profit forecast on Wednesday while turning in a weak first quarter with disappointing sales, as a chilly start to spring kept shoppers from buying seasonal items like clothing.

Target warned in April its first-quarter results would be weaker than anticipated, and its performance was even worse than revised Wall Street expectations due to the cool weather and the impact of higher payroll taxes on spending.

Shares of Target fell 3.6 percent to $68.70.

First-quarter sales at stores open at least a year fell 0.6 percent, while analysts targeted a 0.03 percent decline, according to Thomson Reuters I/B/E/S. Back in April, Target forecast same-store sales would be about flat versus its previous outlook of flat to up 2 percent.

“This is Target’s weakest quarterly same-store sales performance since the Great Recession year of 2009,” said Sandy Skrovan, U.S. research director at Planet Retail.

The last time Target’s quarterly same-store sales fell was in the third quarter of 2009, when it posted a decline of 1.6 percent.

This year, shoppers held off buying spring merchandise such as clothing, fans and garden supplies as a chilly start to the season left them little reason to splurge.

“Across the board things were disappointing for a lot of retailers,” Skrovan said.

The U.S. economy has been somewhat resilient. Core U.S. retail sales, which strip out automobiles, gasoline and building materials, rose 0.5 percent in April, after an upwardly revised 0.1 percent gain in March.

The end of a 2 percent payroll tax cut took effect on January 1 and the smaller paychecks have made some consumers less willing to spend. Still, declining gasoline prices have offset some of the drag on household income.

“While weather was a clear negative in (the first quarter), the revised view suggests that underlying pressure on moderate income consumer spending remains,” said Bernstein Research analyst Colin McGranahan.

The pressure is not limited to Target. Last week, Wal-Mart Stores Inc posted an unexpected 1.4 percent decline in same-store sales at its Walmart U.S. unit, while Kohl’s Corp posted a 1.9 percent decline in same-store sales. And on Wednesday, Lowe’s Cos Inc reported weaker-than-expected quarterly profit, hurt by the chilly weather as well as competition from larger rival Home Depot Inc .

PROFIT DOWN

Target earned $498 million, or 77 cents per share, in the first quarter ended on May 4, compared with a profit of $697 million, or $1.04 per share, a year earlier.

Including the effects from opening Canadian stores, but excluding losses related to the early retirement of debt and gains from the sale of its credit card business, Target earned 82 cents per share. On that basis, analysts looked for 85 cents per share, according to Thomson Reuters I/B/E/S.

Total sales rose 1 percent to $16.71 billion, while analysts expected $16.78 billion in revenue.

The number of transactions in stores open at least a year fell 1.9 percent. Shoppers spent more overall and bought more items, but the selling price per unit was down, suggesting lower-priced items like groceries were selling well, Skrovan said.

Also, more shoppers took advantage of the 5 percent discount offered to Target’s REDcard holders. It said 17.1 percent of sales in its stores were paid for with REDcard credit and debit cards, versus 11.6 percent a year ago.

Target said its first 24 Canadian stores, opened in March, generated $86 million in sales in the quarter. The company, which plans to have 124 stores in Canada by the end of the year, said costs related to the Canadian launch reduced earnings by 24 cents per share in the first quarter.

Target now expects adjusted earnings of $4.70 to $4.90 per share this year, down from its April forecast of $4.85 to $5.05.

(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe)

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By Ryan Vlastelica

NEW YORK (Reuters) – Stocks, bonds and currencies took a wild ride on Wednesday after Federal Reserve Chairman Ben Bernanke said the U.S. central bank’s massive bond-buying program would remain in place for now, even as the Fed considers cutting back stimulus in coming months.

Wall Street stocks jumped as much as 1 percent before turning lower after Bernanke, in testimony to Congress, said that if economic improvement continued, “We could in the next few meetings take a step down in our pace of purchases.”

Bernanke said the Fed’s monetary policy was still providing significant benefits to the economy and that prematurely tightening it would carry substantial risks.

Analysts had not expected Bernanke to announce any substantial change to policy, but his comment on a potential tapering of the Fed’s stimulus program caused stocks to come off their highs.

“The market was disappointed with the fact that they did not get complete clarity and a green light that the current QE measures are going to be in place quarter after quarter,” said Wilmer Stith, portfolio manager at Wilmington Trust Investment Advisors in Wilmington, Delaware. “The market was really hoping to get from Bernanke today certainty that tapering of quantitative easing is really not going to be in the picture in 2013.”

That continued stimulus would be “data-dependent,” added Stith, who helps oversee $25 billion in assets, “just leaves the market in this sort of unsettled environment.”

The dollar rose to a 4-1/2-year high against the yen after Bernanke cited the risks of holding interest rates too low for too long, reversing early losses sparked by his comments that it was too soon to remove existing stimulus measures.

U.S. Treasuries sold off on Bernanke’s comments about possibly tapering bond purchases, with the yield on the 10-year note, which moves inversely to the price, crossing 2 percent, while European shares ended 0.2 percent higher.

The Fed’s policy is widely credited with contributing to the SP 500′s rally of nearly 18 percent in 2013, a surge that has repeatedly taken it to all-time highs, including on Wednesday.

Investors have been trying to determine whether the Fed is ready to begin paring back its $85 billion in monthly purchases of Treasuries and mortgage-backed securities, with expectations that it will start to gradually reduce the purchases later this year. But Bernanke’s explicit mention, even with the caveats he mentioned, sparked the volatility in stocks, bonds and the euro.

The Dow Jones industrial average was up 27.74 points, or 0.18 percent, at 15,415.32. The Standard Poor’s 500 Index was down 1.15 points, or 0.07 percent, at 1,668.01. The Nasdaq Composite Index was down 13.83 points, or 0.39 percent, at 3,488.30.

The benchmark 10-year U.S. Treasury note was down 25/32, the yield at 2.0174 percent, erasing early gains after Bernanke raised the possibility of reducing the Fed’s bond purchases this year if economic growth improves further.

The dollar index was up 0.5 percent against a basket of major currencies, near a three-year high of 84.37 struck last week. The euro fell 0.3 percent in a volatile session.

The dollar index is up nearly 5 percent this year as investors favor the greenback on signs of growing economic momentum and talk of an early end to the Fed’s stimulus effort.

“The market’s bias has been for dollar strength, but it is much more finely balanced now,” said Elsa Lignos, senior currency strategist at RBC Capital Markets. “The reaction (to Bernanke) seems much more likely to be influenced by flows and technicals than the fundamental outlook.”

The dollar hit a 4-1/2-year peak against the yen at 103.60 and a nine-month peak against the Swiss franc of 0.9812.

The dollar’s moves were also seen limited by expectations that minutes from the Fed’s last rate-setting meeting, to be released in the afternoon, will underscore the wide divergence between policymakers on the future of the bank’s bond-buying program.

JAPAN RISES

Japan’s Nikkei climbed 1.6 percent to a 5-1/2-year high after the Bank of Japan, as widely expected, maintained an aggressively loose policy that will inject up to $1.4 trillion into the financial system. The news kept the yen weaker against the dollar, which gained 0.4 percent to 102.85 yen.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.3 percent.

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COMMODITIES MIXED

The debate over the Fed’s next moves, and particularly the potential impact on the dollar and on growth, also dominated commodity markets.

Gold, traditionally seen as an inflation hedge and alternative to the dollar, was up 2.3 percent after Bernanke’s comments, while copper rose to its highest level in two weeks.

Brent oil dropped 1 percent on data showing a surprise jump in U.S. gasoline stocks, suggesting that summer U.S. demand might not meet supply. U.S. crude futures fell 1.6 percent.

(Editing by Dan Grebler and Leslie Adler)

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By Ryan Vlastelica

NEW YORK (Reuters) – Stocks, bonds and currencies took a wild ride on Wednesday, as remarks by Federal Reserve Chairman Ben Bernanke failed to provide the clear picture investors had hoped for of the likely continuation of the U.S. central bank’s bond-buying program, with sentiment ultimately driven by expectations of tapering.

Remarks by Bernanke, in testimony to Congress, that the bond purchases would remain in place for now initially drove sharp gains on Wall Street and sent the dollar lower. But stocks slid and the dollar rose to a 4-1/2-year high against the yen after Bernanke said that if economic improvement continued, “We could in the next few meetings take a step down in our pace of purchases.”

Wall Street stocks posted their biggest daily decline since May 1, after earlier rising more than 1 percent and sending the Dow and SP to record highs. Losses accelerated after minutes from the Fed’s latest meeting showed that some officials were open to tapering large-scale asset purchases as early as the next policy meeting, to be held June 18-19.

“The market was disappointed with the fact that they did not get complete clarity and a green light that the current QE measures are going to be in place quarter after quarter,” said Wilmer Stith, portfolio manager at Wilmington Trust Investment Advisors in Wilmington, Delaware, who helps oversee $25 billion in assets.

“The market was really hoping to get from Bernanke today certainty that tapering of quantitative easing is really not going to be in the picture in 2013.”

Based on Bernanke’s comments, continued stimulus would be “data-dependent,” said Stith, noting, that “just leaves the market in this sort of unsettled environment.”

The dollar rose near a 4-1/2-year high against the yen after Bernanke cited the risks of holding interest rates too low for too long, reversing early losses sparked by his comments that it was too soon to remove existing stimulus measures.

The dollar peaked against the yen at 102.88 and hit a nine-month peak against the Swiss franc at 0.9774.

U.S. Treasuries sold off on Bernanke’s comments about possibly tapering bond purchases, with the yield on the 10-year note, which moves inversely to the price, crossing 2 percent. European shares ended 0.2 percent higher, with European markets closing before the release of the Fed minutes.

The Fed’s policy is widely credited with contributing to the SP 500′s rally of 16 percent so far in 2013, a surge that has taken the benchmark index to one new high after another, including on Wednesday before equities turned negative.

The Dow Jones industrial average was down 80.41 points, or 0.52 percent, at 15,307.17. The Standard Poor’s 500 Index was down 13.81 points, or 0.83 percent, at 1,655.35. The Nasdaq Composite Index was down 38.82 points, or 1.11 percent, at 3,463.30.

The benchmark 10-year U.S. Treasury note was down 30/32, with the yield at 2.035 percent, erasing early gains after Bernanke raised the possibility of reducing the Fed’s bond purchases this year if economic growth improves further.

The dollar index was up 0.5 percent against a basket of major currencies, near a three-year high of 84.37 struck last week. The euro fell 0.3 percent in a volatile session.

The dollar index is up nearly 5 percent this year as investors favor the greenback on signs of growing economic momentum and talk of an early end to the Fed’s stimulus effort.

“The takeaway from (Bernanke’s) speech is clear, which is that the Fed is serious about winding down QE and all of the speculation surrounding this possibility is validated,” said Kathy Lien, managing director of FX Strategy for BK Asset Management in New York.

JAPAN RISES

Japan’s Nikkei climbed 1.6 percent to a 5-1/2-year high after the Bank of Japan, as widely expected, maintained an aggressively loose policy that will inject up to $1.4 trillion into the financial system. The news kept the yen weaker against the dollar, which gained 0.4 percent to 102.86 yen.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.4 percent.

COMMODITIES MIXED

The debate over the Fed’s next moves, and particularly the potential impact on the dollar and on growth, also dominated commodity markets.

Gold fell 0.8 percent while copper rose 1.4 percent to its highest level in two weeks.

Brent oil dropped 1.5 percent on data showing a surprise jump in U.S. gasoline stocks, suggesting that summer U.S. demand might not meet supply. U.S. crude futures fell 2.1 percent, with the decline accelerating after the Fed minutes.

(Editing by Leslie Adler)

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The latest evidence of Hewlett-Packard Co.‘s continuing downfall came in a quarterly earnings report released Wednesday. The results included the seventh consecutive decline in HP’s quarterly revenue compared with the same period the previous year. HP’s 10 percent decrease in revenue during the three months ending in April was the largest drop so far during the slump.

Most of the erosion has occurred under the leadership of Meg Whitman, a former CEO at eBay Inc. and defeated California gubernatorial candidate, who was hired to run HP in September 2011.

Whitman has repeatedly warned that HP’s revenue might not start growing at an acceptable rate for another year or two as she cuts costs, overhauls the company’s product line and pushes into more profitable niches in business software, data analysis and storage and technology consulting. In a Wednesday statement, she reiterated that the company remains in a “multi-year journey.”

“I am encouraged by our performance in the second quarter, and I feel good about the rest of the year,” Whitman said.

In a sign of optimism, HP predicted its earnings for the current quarter ending in July will be a slightly better than analysts have been anticipating. Excluding certain items, the Palo Alto, Calif. company forecast earnings ranging from 84 cents to 87 cents per share. Analysts, on average, had projected 83 cents per share, according to FactSet.

Investors seemed to interpret the guidance as a sign that HP’s cost-cutting measures imposed by Whitman are starting to pay off, even as the company’s sales droop.

HP’s stock surged $2.70, or nearly 13 percent, to $23.93 in extended trading, after the release of the results.

HP earned $1.1 billion, or 55 cents per share, during its most recently completed quarter. That was down 32 percent from $1.6 billion, or 80 cents per share, last year.

If not for certain items unrelated to its ongoing business, the Palo Alto, Calif. company said it would have earned 87 cents per share in its fiscal second quarter. That figure topped the average estimate of 81 cents per share among analysts surveyed by FactSet.

HP’s revenue totaled $27.6 billion — about $400 million below analyst projections.

The troubles plaguing the company primarily stem from a lack of innovation and misguided acquisitions at a pivotal juncture in technology.

Since the release of Apple Inc.’s iPhone six years ago, consumers and corporate customers have been gravitating toward smartphones and tablet computers equipped with touch-screens and voice recognition technology. As these mobile devices add more features and grow increasingly powerful, their prices are falling, too, making them even more attractive compared with laptop and desktop computers.

Like many other PC makers, HP was slow to respond to the shift and then stumbled trying to catch up with Apple and other manufacturers such as Samsung Electronics that make devices running Google Inc.’s Android operating system.

HP’s first foray into tablet computers and smartphones designed for the Palm operating system flopped two years ago. The company is now selling tablets running on Android and a recently introduced version of Windows, but it hasn’t re-entered the smartphone market yet.

Meanwhile, PCs remain more difficult to sell, as HP discovered in its latest quarter. The company’s revenue in the division that sells PCs fell 20 percent in the latest quarter. Cathie Lesjak, HP’s chief financial officer, described the market conditions as “very tough” in an interview.

Printers are also falling out of vogue as mobile devices make it easier to quickly look up data, and services reduce the need for information on paper. HP fared better in the latest quarter than it has in recent periods as its printer revenue dipped by just 1 percent.

Whitman believes HP can bounce back by inventing new technologies and packing them into appealing products more quickly, recapturing the spirit the company established as a Silicon Valley pioneer nearly three-quarters of a century ago.

The effectiveness of Whitman’s strategy is likely to be tested during the next few months as HP releases another wave of PCs that have touch-screen screens and tablets in different sizes. HP is lowering the prices on its upcoming touch-screen PCs in an effort to lure more consumers.

All the new devices are expected to be on the market in time for the back-to-school season.

Most of HP’s devices are running on the latest version of Windows that Microsoft Corp. released seven months ago. The dramatic overhaul of the operating system, called Windows 8, is designed to be controlled both by touch and the traditional method of using a keyboard or mouse. Despite a massive marketing campaign by Microsoft, Windows 8 got off to a slow start, partly because some of its features frustrated and confused longtime users who preferred the old setup.

The backlash prompted Microsoft to fine tune the system in a series of changes that will be rolled out later this year as Windows 8.1. Microsoft still hasn’t publicly provided details about what kind of revisions are being made.

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By Herbert Lash

NEW YORK (Reuters) – Global equity markets mostly rose on Monday, driven higher by a flurry of merger and acquisition activity, while a recent tumble in the yen against the dollar halted after Japan‘s economy minister suggested the currency might have weakened enough.

Major American and European stock indices are up double digits – the U.S. benchmark SP 500 index is almost 17 percent higher so far this year – and investors still see better returns ahead in equities, even as Wall Street closed slightly lower.

Deals such as Yahoo‘s $1.1 billion bid for blogging service Tumblr indicate companies still are seeking to grow through acquisitions despite record high share prices, a bullish sign for stocks. Yahoo rose 0.23 percent to $26.58.

In another deal, generic drugmaker Actavis Inc., itself the subject of takeover speculation, said it would buy specialty pharmaceutical company Warner Chilcott Plc for $5 billion in stock.

Actavis rose 1.32 percent to $127.15, while Warner Chilcott gained 2.03 percent to $19.60.

U.S. stocks fell after modest gains earlier in the session on a day with no economic data and little news or a catalyst to drive prices much in either direction, said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York.

“There are people scared by the sharpness and the length of this rally, which is totally understandable, but there are still those who are afraid to not invest and miss the rally,” he said.

The Dow Jones industrial average closed down 19.12 points, or 0.12 percent, at 15,335.28. The Standard Poor’s 500 Index fell 1.18 points, or 0.07 percent, to 1,666.29. The Nasdaq Composite Index shed 2.53 points, or 0.07 percent, at 3,496.43.

Major indices elsewhere mostly rose. MSCI’s all-country world equity index rose 0.43 percent to its highest since June 2008. MSCI’s emerging markets index rose 0.25 percent, but Mexico’s IPC index fell 1.74 percent, beaten lower by the weak outlook for the country’s leading shares.

European shares hit five-year highs, boosted by strength in German stocks and a travel sector lifted by a surge in Ryanair after it reported better-than-expected earnings for the past year. Ryanair rose 6.87 percent to a record 6.765 euro.

Britain’s benchmark FTSE 100 index rose to its best closing level since late 2000, while the FTSEurofirst-300 index of leading European shares rose 0.31 percent to close at 1,252.09.

The Japanese economy minister, Akira Amari, said the yen’s excessive strength had largely corrected and further weakness could damage Japan’s economy.

Analysts, however, said any sharp dip in the dollar against the yen was a buying opportunity as Tokyo was committed to easier monetary policy. While the dollar fell sharply on Amari’s comments and remained down on the day, it was off the session low.

The dollar was last 0.64 percent lower at 102.26 yen, having hit a low of 102.19. Last Friday, the dollar reached a high of 103.30 yen.

The euro gained 0.59 percent against the dollar to 128.886.

Gold gained about 2 percent after a roller coaster session in which it lurched $35 an ounce higher to snap seven consecutive days of losses, with traders citing a wave of pent-up short-covering.

Short sellers buy a borrowed security and immediately sell it in the hope of buying it back at a lower price to pay the lender. When prices are not near the agreed “strike” price, short-sellers are forced to buy, pushing prices higher.

Gold is down 17 percent for the year. Hedge funds and other major commodity speculators pulled $1.4 billion from the U.S. gold futures market in the week to May 14, Reuters calculations of data from the Commodity Futures Trading Commission show.

Spot gold prices rebounded $35.96 on Monday, to $1,394.60 an ounce after slipping to $1,338.95 its weakest since April 16.

The beginning of the end of the Fed’s massive bond-buying program might come sooner than many investors think if recent gains in the U.S. labour market do not prove fleeting.

U.S. government debt prices slipped after an early rebound from last week’s sell-off as the dollar weakened against the yen. The benchmark 10-year U.S. Treasury note was down 3/32 in price to yield 1.9629 percent.

Brent crude traded near break-even, weighed by ample supplies, weaker demand for fuel and a strong dollar.

Brent crude for July was up 16 cents to settle at $104.80 a barrel. U.S. crude rose 69 cents to settle at $96.71.

(Reporting by Herbert Lash; Editing by Dan Grebler)

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By Herbert Lash

NEW YORK (Reuters) – Global equity markets mostly rose on Monday, driven higher by a flurry of merger and acquisition activity, while a recent tumble in the yen against the dollar halted after Japan’s economy minister suggested the currency might have weakened enough.

Major American and European stock indices are up double digits – the U.S. benchmark SP 500 index is almost 17 percent higher so far this year – and investors still see better returns ahead in equities, even as Wall Street closed slightly lower.

Deals such as Yahoo‘s $1.1 billion bid for blogging service Tumblr indicate companies still are seeking to grow through acquisitions despite record high share prices, a bullish sign for stocks. Yahoo rose 0.23 percent to $26.58.

In another deal, generic drugmaker Actavis Inc. , itself the subject of takeover speculation, said it would buy specialty pharmaceutical company Warner Chilcott Plc for $5 billion in stock.

Actavis rose 1.32 percent to $127.15, while Warner Chilcott gained 2.03 percent to $19.60.

U.S. stocks fell after modest gains earlier in the session on a day with no economic data and little news or a catalyst to drive prices much in either direction, said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York.

“There are people scared by the sharpness and the length of this rally, which is totally understandable, but there are still those who are afraid to not invest and miss the rally,” he said.

The Dow Jones industrial average closed down 19.12 points, or 0.12 percent, at 15,335.28. The Standard Poor’s 500 Index fell 1.18 points, or 0.07 percent, to 1,666.29. The Nasdaq Composite Index shed 2.53 points, or 0.07 percent, at 3,496.43.

Major indices elsewhere mostly rose. MSCI’s all-country world equity index rose 0.43 percent to its highest since June 2008. MSCI’s emerging markets index rose 0.25 percent, but Mexico’s IPC index fell 1.74 percent, beaten lower by the weak outlook for the country’s leading shares.

European shares hit five-year highs, boosted by strength in German stocks and a travel sector lifted by a surge in Ryanair after it reported better-than-expected earnings for the past year. Ryanair rose 6.87 percent to a record 6.765 euro.

Britain’s benchmark FTSE 100 index rose to its best closing level since late 2000, while the FTSEurofirst-300 index of leading European shares rose 0.31 percent to close at 1,252.09.

The Japanese economy minister, Akira Amari, said the yen’s excessive strength had largely corrected and further weakness could damage Japan’s economy.

Analysts, however, said any sharp dip in the dollar against the yen was a buying opportunity as Tokyo was committed to easier monetary policy. While the dollar fell sharply on Amari’s comments and remained down on the day, it was off the session low.

The dollar was last 0.64 percent lower at 102.26 yen, having hit a low of 102.19. Last Friday, the dollar reached a high of 103.30 yen.

The euro gained 0.59 percent against the dollar to 128.886.

Gold gained about 2 percent after a roller coaster session in which it lurched $35 an ounce higher to snap seven consecutive days of losses, with traders citing a wave of pent-up short-covering.

Short sellers buy a borrowed security and immediately sell it in the hope of buying it back at a lower price to pay the lender. When prices are not near the agreed “strike” price, short-sellers are forced to buy, pushing prices higher.

Gold is down 17 percent for the year. Hedge funds and other major commodity speculators pulled $1.4 billion from the U.S. gold futures market in the week to May 14, Reuters calculations of data from the Commodity Futures Trading Commission show.

Spot gold prices rebounded $35.96 on Monday, to $1,394.60 an ounce after slipping to $1,338.95 its weakest since April 16.

The beginning of the end of the Fed’s massive bond-buying program might come sooner than many investors think if recent gains in the U.S. labor market do not prove fleeting.

U.S. government debt prices slipped after an early rebound from last week’s sell-off as the dollar weakened against the yen. The benchmark 10-year U.S. Treasury note was down 3/32 in price to yield 1.9629 percent.

Brent crude traded near break-even, weighed by ample supplies, weaker demand for fuel and a strong dollar.

Brent crude for July was up 16 cents to settle at $104.80 a barrel. U.S. crude rose 69 cents to settle at $96.71.

(Reporting by Herbert Lash; Editing by Dan Grebler)

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The Russell 2000, an index of small-company stocks, climbed above 1,000 points for the first time and ended higher Monday, even as the Dow Jones industrial average, the Standard Poor’s 500 index and the Nasdaq composite index all edged lower.

Small stocks are doing well because they are more focused on the U.S., which is recovering, and are less exposed to recession-plagued Europe than the large international companies that make up the Dow and the SP 500 index.

The gains for the smaller companies are encouraging for the broader stock market because they show that investors are becoming more comfortable about the economy and investing in riskier assets, said Rob Lutts, Chief Investment Officer at Cabot Money Management.

Small-company stocks are considered riskier than the stocks of well-established, large companies like IBM or Coca-Cola. That’s because small companies are often relatively young and tend to have less diversified businesses than larger ones, making them more susceptible to swings in demand from their customers. There are also fewer buyers and sellers for them, which can make the stocks harder to off-load if prices start to fall.

“Having smaller stocks hit new highs means that the rally is broad,” Lutts said. “It gives us a little more confidence that it’s a good, sustainable rally that can hold together for a while.”

The Russell 2000 ended the day 1.70 points, or 0.2 percent, higher at 997.98. The index climbed as high as 1001.50 at midday. The index is 17.5 percent higher for the year, a better performance than better-known market barometers like the Dow and SP.

Major indexes fluctuated between small gains and losses for most of Monday. On Friday they ended at record levels after four straight weeks of gains.

The Dow closed down 19.12 points, or 0.1 percent, at 15,335.28, paring its gain for the year to 17 percent. The SP 500 index fell 1.18 points, or 0.1 percent, to 1,666.29. Its advance for the year now stands at 16.8 percent.

Investors are focusing on the Federal Reserve this week and looking for clues about what it plans to do next with its economic stimulus program. On Wednesday Fed Chairman Ben Bernanke will appear before Congress and the central bank will release minutes of its most recent policy meeting.

The Fed is buying $85 billion of bonds every month to keep long-term interest rates low. That has encouraged investors to put money into stocks instead of bonds. The yield on the 10-year Treasury note has been below 2 percent almost continually since April 12. That’s less than many large companies pay in dividends.

Policy makers are unlikely to cut back on stimulus just yet since U.S. economic growth is likely to slow in the second quarter, said Scott Wren, a senior equity strategist at Wells Fargo Advisors. As a consequence, Wren said, stocks are likely to continue to rise.

“At some point, we will see some sort of a pullback, but it doesn’t seem like it’s going to be right now,” said Wren. “In the near term we’re probably going to trade a little bit higher.”

The stock market rally is also is being underpinned by investors moving back into stocks, reversing years of outflows of funds from equity markets, said Jerry Braakman, chief investment officer at First American Trust.

Investors have invested about net $17 billion into domestic stock mutual funds since the start of the year, according to data from the Investment Company Institute. Investors have pulled money out of mutual funds every year since the beginning of the financial crisis in 2007.

“This market rally still has legs, partly because we’ve seen huge retail inflows back into equities,” Braakman said. “It’s hard to beat the money flow.”

In commodities trading, the price of crude oil rose 69 cents, or 0.7 percent, to $96.71 a barrel.

The price of gold rose for the first day in eight as the dollar fell. The precious metal climbed $19.40, or 1.4 percent, to $1,384. Gold has slumped this month as its attraction as an alternative investment fades as the dollar appreciates.

The U.S. currency is strengthening because investors believe the U.S. economy is in better shape than the Japanese or European economies.

The dollar’s rally paused on Monday, though, and the U.S. currency fell against the euro and the yen. The dollar index also dropped, after climbing to its highest level in close to three years Friday.

In U.S. government bond trading, the yield on the 10-year Treasury note rose to 1.97 percent from 1.93 percent.

The Nasdaq composite index fell 2.53 points, or 0.1 percent, to 3,496.43 points.

Among stocks in focus on Monday:

— Actavis rose $1.65, or 1.3 percent, to $127.15 after the pharmaceutical company said it’s buying Warner Chilcott. The all-stock deal, valued at $8.5 billion, would create the third-biggest specialty pharmaceutical company in the U.S.

— Chesapeake Energy rose 53 cents, or 2.6 percent, to $20.80 after the natural gas producer named Anadarko Petroleum executive Robert Douglas Lawler as its new CEO. He takes over as Chesapeake continues selling assets to pare down an enormous debt burden.

—Websense, an internet security firm, surged $5.53, or 29 percent, to $24.76 after the company agreed to be taken private for $906 million by private equity firm Vista Equity Partners.

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By Angela Moon

NEW YORK (Reuters) – U.S. stocks ended little changed on Monday, with indexes hovering near record levels as concerns about a correction cut earlier gains that had been prompted by news about a flurry of acquisitions.

The Dow and the SP 500 briefly hit all-time intraday highs.

Early in the session, investors’ sentiment was brightened by a slew of deal news, including Yahoo Inc‘s acquisition of Tumblr.

Among the day’s top gainers were solar companies after shares of JA Solar Holdings Co Ltd soared following an unexpected rise in revenue and a quarterly loss that was far smaller than expected.

Energy stocks were the day’s top gainers in the SP 500 while consumer staples were the biggest underperformers. The SP energy sector index rose 1.3 percent. In contrast, the SP consumer staples index fell 1 percent.

Earlier, the Dow climbed to an all-time intraday high at 15,391.84, while the SP 500 edged up to a new intraday record high at 1,672.84. Both major indexes are up about 17 percent for the year so far.

“Today is definitely a slow period in terms of news or economic data, and there isn’t a catalyst to really move higher or lower,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.

“There are people scared by the sharpness and the length of this rally, which is totally understandable. But there are still those who are afraid to not invest and miss the rally.”

The SP 500 is up nearly 1,000 points from its low in March 2009. And more than 38 percent of the stocks hit a 52-week high within the SP 500 last week – the highest percentage since at least 1990.

The Dow Jones industrial average slipped 19.12 points, or 0.12 percent, to 15,335.28 at the close. The Standard Poor’s 500 Index shed 1.18 points, or 0.07 percent, to finish at 1,666.29. The Nasdaq Composite Index declined 2.53 points, or 0.07 percent, to end at 3,496.43.

Earlier, the Nasdaq touched a fresh 52-week intraday high at 3,509.41.

Yahoo Inc will buy blogging service Tumblr for $1.1 billion cash, giving the Internet pioneer a much needed social media platform to reach a younger generation of users and breathe new life into its ailing brand. Yahoo shares rose 0.2 percent to $26.58.

Shares of JA Solar jumped 70.4 percent to $9.56. It focus on margins over volume paid off as the Chinese solar products maker halved its operating loss in the first quarter by selling more panels in high-margin Japan.

Other solar companies’ shares such as China Sunergy Co Ltd surged 50 percent to $2.52 and LDK Solar Co Ltd shot up 20.4 percent to $1.83. Yingli Green Energy Holdings Co climbed 13.1 percent to $3.10.

In other deal news, Actavis rose 1.3 percent to $127.15 after the company said it will acquire Warner Chilcott Plc in a stock-for-stock transaction valued at $5 billion. Warner Chilcott gained 2 percent to $19.60.

Freeport-McMoRan Copper Gold and Plains Exploration Production said they would pay shareholders more in dividends if they approved Freeport’s roughly $6 billion takeover offer for Plains. Plains shares leaped 7.4 percent to $48.94, while Freeport’s stock gained 0.6 percent to $32.88.

Wall Street got more feedback from the Fed on Monday with some comments from Charles Evans, the president of the Federal Reserve Bank of Chicago. Evans said the U.S. Federal Reserve could keep up its current level of bond-buying stimulus, but could end it abruptly in the autumn if by then it was sure that the labor market was on a solid footing.

Investors will get more comments from the Fed when Chairman Ben Bernanke testifies before a congressional committee on Wednesday.

The beginning of the end of the Fed’s massive bond-buying program, which has given strong support to stock gains, might come sooner than many investors think if recent gains in the U.S. labor market hold.

The Fed will also release minutes from its most recent policy-setting meeting on Wednesday. The minutes will be parsed for signs of the Fed’s direction on monetary stimulus.

Volume was roughly 6 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, slightly lower than the year-to-date average daily closing volume of about 6.34 billion.

Advancers outnumbered decliners on the NYSE by a ratio of 17 to 13. On the Nasdaq, nearly 14 stocks rose for every 11 that fell.

(Editing by Jan Paschal)

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