It had all the makings of a good day — first trading day of the new year, falling oil prices and a better-than-expected outlook from retail giant Wal-Mart Stores Inc. In fact, the session began well, but the brief rally ended suddenly on some mixed economic data, sending U.S. markets sharply into the red Monday.

At close, the Dow Jones Industrial Average was down 53.58 points or 0.50% to 10729.43 after rising as much as 84.38 points soon after the bell. The Standard & Poor’s 500-stock index fell 9.84 or 0.81% to 1202.08 and the technology-heavy Nasdaq Composite Index fell 23.29 points or 0.64% to 2152.15.

Canadian markets were closed for the New Year’s holiday, as were many overseas exchanges.

In New York, the session started well as the Dow opened up more than 80 points at one point in the morning, buoyed by falling oil prices and the bullish sales forecast from Wal-Mart.

The drop in crude futures, triggered by mild weather in the Northeast and reports of increased crude production, was viewed as good news for consumer spending, which accounts for two-thirds of the U.S.’s economy. Light sweet crude for February delivery fell $1.41 to settle at US$42.12 a barrel on the New York Mercantile Exchange. London’s International Petroleum Exchange was closed Monday for a holiday.

A barrel of light crude was quoted at US$42, down US$1.45, on the New York Mercantile Exchange.

That good news was followed by a report from Wal-Mart that sales open at least a year rose 3% for December, prompted by strong after-Christmas sales. The company’s previous forecasts were in the middle of a 1%-3% range. Wal-Mart gained 0.95% to $53.32.

Meanwhile, Kmart Holding Corp. said its same-store sales fell 4.6% for November and December. But that was an improvement over past sales declines for the struggling discount retailer. Kmart climbed 1.16% to US$100.10.

Drug store chain Walgreen Co. jumped 5% to US$40.30 after the company reported a 30.5 percent jump in profits, crediting increases in prescription and general merchandise sales. The company beat Wall Street earnings forecasts by 2¢ per share.

But mid-morning, investors’ mood shifted as a mix of economic news was released.

A report from the Commerce Department said construction spending took an unexpected hit in November, falling 0.4% for the month. Investors had been expecting a rise of 0.4% after October’s 0.3% gain.

The Institute for Supply Management’s manufacturing index rose to 58.6 in December, from 57.8 in the previous month and edging past Wall Street’s prediction of 58.5. The index measures the strength of manufacturing activity in the United States and analysts noted that some aspects of the report were disturbing.

The big drop in oil prices hurt related stocks. In late trading, ChevronTexaco Corp. slid $1.36 to US$51.15, ConocoPhillips lost $2.34 to US$84.49 and Exxon Mobil Corp. fell $1.22 to US$50.04.

Declining issues outnumbered advancers by nearly three to one on the New York Stock Exchange, where volume came to 952.31 million shares vs 441.15 million at the same point on Friday.

Overseas, markets in Japan and Britain were closed for the New Year’s holiday. Elsewhere, Germany’s DAX index was up 0.83%, and France’s CAC-40 climbed 0.9% for the session.