NEW YORK — Oil prices Monday gave up a good chunk of Friday's record surge, thanks in part to comments from Washington in support of the dollar, but the stock market recouped only a small fraction of its end-of-the-week plunge.
The major stock averages finished mixed, disappointing investors who were hoping for a more forceful snap-back after the Dow Jones industrial average tumbled nearly 400 points on Friday.
The Dow gained 70.51 points, or 0.6%, to 12,280.32, while the Standard & Poor's 500 eked out a gain of 1.08 points, or 0.1%, to 1,361.76.
But the Nasdaq composite sagged 15.10 points, or 0.6%, to 2,459.46 as technology stocks, the Nasdaq's dominant sector, lost ground.
Stocks of smaller companies, which had been leading the market recently, also closed lower. The Russell 2,000 small-cap index dropped 5.11 points, or 0.7%, to 735.26.
Financial stocks tumbled on word of a huge loss at Lehman Bros. Holdings that served as a reminder of how much banks and brokerages are struggling in the aftermath of the sub-prime mortgage crisis.
Housing stocks also declined.
"It's disappointing that we didn't have more of a bounce-back, especially with crude-oil prices going down $4 a barrel," said Alfred Kugel, Chicago-based chief strategist for investment-management firm Atlantic Trust of Atlanta. "I don't know why the market didn't do better."
Crude futures, which Friday soared $10.75 a barrel -- their biggest one-day gain on record -- sank $4.19 to a barrel Monday.
Oil's rally Friday was propelled in part by a weaker dollar, and its retreat Monday was partly driven by a rebound in the currency against the euro and the yen after Treasury Secretary Henry M. Paulson Jr. said he wouldn't rule out the idea of Treasury intervention to boost the greenback's value.
"I would never take intervention off the table or any policy tool off the table," he said. "And I just can't speculate about what we will or won't do."
President Bush also tried to jawbone the buck higher. Speaking to reporters before leaving for a European trip, he reiterated that "a strong dollar is in our nation's interests."
"They're putting markets on notice," said Jay Bryson, global economist at Wachovia Corp. in Charlotte, N.C.
The value of the dollar has a significant effect on the prices of oil and other commodities, which are set in dollars worldwide. Because many commodity producers are based outside the U.S., they often demand higher prices as the dollar slides -- and accept lower prices as it rises.
In addition, a strengthening dollar can put downward pressure on commodity prices by prompting global investors to favor U.S. stocks and other assets over commodities.
In the financial sector, Lehman fell $2.81, or 8.7%, to $29.48. The securities firm said it would report a $2.8-billion loss for its fiscal fourth quarter and would raise $6 billion, more than expected, to replenish capital.
Lehman's performance in the quarter, which ended May 31, was hurt by mortgage-related write-offs and fixed-income trading losses.
Bank stocks were hit by news that Standard & Poor's was cutting ratings on mortgage-related bonds insured by MBIA and Ambac Financial Group, raising the prospect that banks could have to take larger write-offs.
JPMorgan Chase skidded 6.4%. National City was off 9.7%. The BKX bank index slumped 3.2%.
Washington Mutual sank $1.28, or 17%, to $6.25 after a UBS analyst said the savings and loan company could incur $27 billion in losses through 2011.
In other market highlights:
* McDonald's rose $2.36, or 4.1%, to $59.31, after the world's largest hamburger chain said global sales at locations open at least a year rose 7.7% in May.
* Alcoa rose $2.95, or 7.5, to $42.17, after the aluminum producer received a positive mention in Barron's magazine.
* Apple retreated $4.03, or 2.2%, to $181.61 after unveiling an update of its popular iPhone.
* Declining issues outnumbered advancers by nearly 2 to 1 on the New York Stock Exchange.
* Yields on government bonds rose on continuing jitters about inflation as well as a report from the National Assn. of Realtors saying pending sales of existing homes rose more than 6% in April to the highest level since October. The benchmark 10-year Treasury note's yield rose to 4% from 3.91% late Friday.
* Overseas, key stock indexes rose 0.5% in Britain, 0.2% in Germany, 0.1% in France. Shares slumped 2.1% in Japan.