By Donna Kardos Yesalavich, MarketWatch
The Dow Jones Industrial Average rose slightly Friday while other stock measures fell modestly in a quiet ending to a second-straight year of gains for the market.
The Dow Jones Industrial Average (DJI) closed up 7.80 points, or 0.07%, at 11,577.51, up 11% from where it began 2010. The Dow's gain for the year represents its second-straight annual increase, with almost half of the 2010 climb having come this month; it rose 5.2% in December.
The Dow came close to ending 2010 at a fresh closing high for the year; if it closed above 11585.38, it would have reached its highest close since August 2008.
Alcoa, Inc. (AA) led the Dow's ascent on Friday, rising 1.2%. However, Alcoa turned in the fifth-worst performance of the year among the measure's 30 components, with a 4.5% drop.
Hewlett-Packard Co. (HPQ) was the Dow's worst performer of 2010 with an 18% drop over the period. It was also weak Friday, slipping 0.4%. The Dow's best performer of the year was Caterpillar, Inc. (CAT) with a 64% jump. Caterpillar shed 0.2% on Friday.
The Nasdaq Composite (RIXF) shed 10.11, or 0.38%, to 2,652.87, on Friday, a 17% increase from a year ago. The measure was hurt Friday by declines across many of its heaviest-weighted components including Apple, Inc.(AAPL), which slipped 0.3% in a tiny pullback from its 53% jump this year.
The Standard & Poor's 500 index (SPX) edged down 0.24, or 0.02%, to 1257.64, up 13% for the year. The measure climbed 6.5% this month, marking its best December performance in 19 years.
While 2010 was ultimately positive for stocks, it was anything but smooth as investors were spooked by events such as the May 6 "flash crash" and ongoing worries over the financial health of several euro-zone governments that resulted in rescues for Greece and Ireland. A new $600 billion stimulus plan from the Federal Reserve and improving economic data helped the market recover from a summer slump, with stocks ultimately reaching highs not seen since before the fall of Lehman Brothers in 2008.
"The year, it was kind of like a long road trip," said Lawrence Creatura, manager of the Federated Clover Small Value Fund. "It wasn't always comfortable, but the destination was worth it."
The consumer-discretionary sector was the best-performing category in the S&P 500 this year with a 26% jump, with the industrials, materials and energy sectors also posting double-digit gains. The health-care and utilities sectors lagged with gains of less than 1% each.
Small-capitalization stocks handily outperformed large-cap stocks. The Russell 2000 index(RUT) of small-cap stocks surged 25% this year, its best year since 2003, although it fell 6.09, or 0.77%, to 783.65, in Friday's session.
Friday's small moves in U.S. stocks came as investors made their final position changes for 2010, moving to lock in profits from 2010 while setting up fresh bets for the new year.
Still, volume was particularly light, with just under 2 billion shares having changed hands in New York Stock Exchange Composite trading. The full-day average for 2010 is 4.8 billion shares. Friday marked the second-lowest volume day of the year, behind the day after Thanksgiving.
On Friday, no major economic data were released, but there was talk of more deal activity.
Imax Corp. (IMAX) shares rose 4.5% after U.K. newspaper the Daily Mail said Sony Corp. (SNE) is considering a $40-a-share bid for big-screen movie company, with Walt Disney Co. (DIS) interested as well. U.S. shares of Sony edged up 0.4% while Disney tacked on 0.1%. Imax declined to comment on the report.Read more on tech stocks.
CVS Caremark Corp. (CVS) shares slipped 0.7% after the drugstore chain agreed to acquire Universal American's (UAM) Medicare Part D prescription drug business for $1.25 billion, a deal that will more than double the size of CVS's share in that program. Universal American's stock surged 40%.
"We're ending on a very positive note for the market," said Quincy Krosby, chief market strategist at Prudential Financial.
The CVS deal and speculation over a deal for Imax reflects "a trend that has gained momentum and we expect to see more of that next year," Krosby said. "The reason this is significant is that it's indicative of and it underscores a confidence that the economy is gaining traction."
She noted that despite the improving deal environment, the market is entering 2011 with "a number of issues that we're going to worry about," including the beleaguered housing market. ... that's healthy. Markets always need something to worry about."
Among stocks in focus, Borders Group (BGP) shares tumbled 22% after the company said it is delaying payments to some publishers. The bookstore chain said the delays were part of its efforts to refinance its debt, but it warned "there can be no assurance" that its larger refinancing efforts will be successful.