Stocks holding steady on a short, light day

With the stock market closing three hours early at 10 a.m. PDT , and many traders gone for a long holiday weekend, the session proceeded quietly. Thin trading volume can exacerbate the market's moves, but on Friday, stocks traded in a narrow range.

Investors were focused on the prospects for the holiday shopping period, which began in earnest Friday. Wall Street expects retailers will suffer as consumers, nervous about lost jobs, falling home values and a jittery stock market, grow more restrained in their spending this year.

"You've seen all sorts of numbers that point to the fact that discretionary spending in the economy has come to an absolute halt," said David Reilly, director of portfolio strategy at Rydex Investments.

A rare drop in year-over-year holiday spending would be troubling, as it is the most important slice of the year for most retailers and because consumer purchases account for more than two-thirds of U.S. economic activity.

But while some stores around the nation appeared busy Friday morning as shoppers looked for bargains, the early evidence is anecdotal and Wall Street will have to wait for cash register tallies. "The discounting appears to be unbelievable," said Reilly. "The retail sector is going to do whatever it can to get people through the door."

Reilly said Wall Street is likely to remain jittery as it tries to estimate how long the economy will remain weak; he is forecasting a recession of more than a year rather than the typical 10 months.

"I think the market is still in the process of adjusting to the fact that we're in a very difficult recession," he said.

In midday trading, the Dow Jones industrial average fell 37.28, or 0.43%, to 8,763.89.

Broader stock indicators were mixed. The Standard & Poor's 500 index rose 1.57, or 0.18%, to 889.25, while the Nasdaq composite index declined 11.13, or 0.73%, to 1,520.97.

The Russell 2000 index of smaller companies fell 2.51, or 0.54%, to 466.35.

Because volumes remain low, the indexes' moves Friday don't give investors a strong sense of the market's direction. Still, it was a welcome sign that the market did not sell off strongly after the Dow's streak of four straight advances, which gave the index its biggest four-day gain since 1932.

The S&P 500 index also rose for the four consecutive days that ended Thursday, logging its largest four-day rally since 1933.

When trading began Friday, the Dow was up 8.5% for the week and the S&P 500 had added 11%.

Government bonds were little changed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.96% from 2.99% late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, edged up to 0.04% from 0.03% Wednesday.