* ISM manufacturing index lowest in more than three years
* Retail stocks weak for the day, but chipmaker AMD rallies
* S&P 500 trading near 50-day moving average
* Dow off 0.5 pct, S&P 500 off 0.5 pct, Nasdaq off 0.3 pct
By Ryan Vlastelica
NEW YORK, Dec 3 (Reuters) - U.S. stocks struggled to extend
the previous week's gains, dropping on Monday as disappointing
U.S. factory numbers dampened optimism about China's economic
The declines broke a three-day streak of gains for the S&P
500, keeping it shy of its 50-day moving average of about 1,420,
a level that the index has been below since Oct. 22, and now
serving as a key resistance point for investors.
Manufacturing activity in the United States surprisingly
contracted in November, the Institute for Supply Management
said, dropping to its lowest level in more than three years.
Economic data has been mixed in recent months, fanning worries
about the pace of growth at a time when investors are already
concerned about the "fiscal cliff" issue in
Washington.[ID:nL 1 E8N3580]
The ISM number "was below expectations that were already
conservative, and that puts an exclamation point on the concern
many of us have about the cliff's impact on the economy," said
Leo Grohowski, chief investment officer at BNY Mellon Wealth
Management in New York.
Markets had opened higher as output by China's factories
grew in November for the first time in more than a year, data
showed. Investors look to strength from China, the world's
second-largest economy, to offset weak growth in the United
States and Europe.
Still, the fiscal cliff remains investors' primary focus,
with political haggling continuing over how to deal with large
automatic spending cuts and tax hikes scheduled to kick in next
year. The worry is that the combination of reduced spending and
higher taxes could tip the U.S. economy back into recession.
While off its highs for the year, the S&P 500 is still up
12.1 percent for 2012.
"This could be the last opportunity for investors to take
profits" after an unexpectedly strong year, said Grohowski, who
helps oversee about $170 billion in assets.
Materials were the weakest sector on Monday, led lower by
Newmont Mining after the company said its CEO resigned.
Newmont's stock fell 3 percent to $45.69. Dow component DuPont
dropped 1.7 percent to $42.39. An S&P materials index
lost 1.8 percent.
The Dow Jones industrial average fell 59.98 points,
or 0.46 percent, to 12,965.60 at the close. The Standard &
Poor's 500 Index declined 6.72 points, or 0.47 percent,
to 1,409.46. The Nasdaq Composite Index dropped 8.04
points, or 0.27 percent, to end at 3,002.20.
U.S. Treasury Secretary Timothy Geithner pushed Republicans
on Sunday to offer specific ideas to cut the deficit. He
predicted that they would agree to raise tax rates on the rich
to obtain a year-end deal to avoid the fiscal cliff.
Among other factors serving to offset the ISM report on U.S.
factories were two developments in the euro zone: Spain formally
requested the disbursement of more than $50 billion of European
funds to recapitalize its crippled banking sector, while Greece
said it would spend 10 billion euros ($13 billion) to buy back
bonds in a bid to reduce its ballooning debt.
The PHLX Europe sector index added 0.1 percent.
Dell shares gained 4.4 percent to $10.06. The stock
was one of the biggest percentage gainers in both the S&P 500
and Nasdaq 100 after Goldman Sachs upgraded the stock to
"buy" from "sell."
Advanced Micro Devices was the S&P's top gainer,
rising 7.3 percent to $2.36. Options traders appeared to be
betting on further gains ahead. Early options order flow was
focused on upside April calls, including a sweep of 3,594 April
$3.50 strike calls for 16 cents per contract when the market was
14 cents to 16 cents, said WhatsTrading.com options strategist
Retail stocks were among the weakest of the day, with J.C.
Penney Co off 3.2 percent at $17.36 and Staples Inc
off 2.3 percent at $11.43. Consumer discretionary names
tend to underperform during periods of economic uncertainty as
consumers focus on core purchases.
Volume was light, with about 5.58 billion shares traded on
the New York Stock Exchange, the Nasdaq and the NYSE MKT, well
below last year's daily average of 7.84 billion.
Decliners outnumbered advancers on the NYSE by a ratio of 3
to 2, while on the Nasdaq, about 14 stocks fell for every 11