Dec. 31 (Bloomberg) -- Most U.S. stocks retreated, as the Standard & Poor’s 500 Index posted its second straight annual gain, and had its best December since 1991.

Chevron Corp. and Hewlett-Packard Co. fell 0.4 percent each to lead declines in the Dow Jones Industrial Average. CVS Caremark Corp. lost 0.7 percent after the drugstore operator agreed to buy a unit of Universal American Financial Corp. Borders Group Inc. plunged 22 percent after suspending payments to some publishers. Alcoa Inc. rose 1.2 percent for the biggest gain in the Dow.

About seven stocks declined for every five that rose on U.S. exchanges. The S&P 500 fell less than 0.1 percent to 1,257.64 as of 4 p.m. in New York. The index climbed 13 percent this year and 6.5 percent this month. The Dow gained 7.80 points, or 0.1 percent, to 11,577.51 today, and rose 11 percent this year. The 2010 advance follows a 23 percent rise in the S&P 500 in 2009, for the biggest two-year jump since the Internet- bubble rally of 1998 and 1999.

“This year has been like a long road trip. It wasn’t always pleasant while on the way, but it was good once we reached the destination,” said Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $340 billion. “Today we have skeleton crews at investment houses and trading shops, so it’s likely going to be a very light day.”

U.S. economic reports yesterday showed initial applications for unemployment benefits declined and new-home sales increased that topped projections.

Earnings, Fed Moves

The S&P 500 has advanced 23 percent from its July low as companies reported better-than-estimated earnings and the Federal Reserve pledged to buy up to an extra $600 billion in Treasuries to stimulate the economy. Its rally to a two-year high has pushed its valuation to 15.7 times reported profits, the most since June.

This year’s increase for the benchmark index for U.S. equities means the gauge has risen for seven of the past eight years. The index’s 86 percent surge from a 12-year low on March 9, 2009, is the biggest for a comparable time period since 1955, according to Howard Silverblatt, senior index analyst at S&P.

The S&P 500’s advance sent the gauge above 1,251.70 on Dec. 21 for the first time since Sept. 12, 2008, the last trading day before Lehman Brothers Holdings Inc. filed the world’s biggest bankruptcy and prompted a 46 percent drop for the benchmark gauge through March 2009. The December rally for the benchmark index comes after it lost 0.2 percent in November and posted a combined gain of 13 percent in September and October, the biggest increase during those months since 1998.

‘Optimistic’ on 2011

“I’m quite optimistic about the performance of equity markets in the year ahead,” said Andrew Popper, chief investment officer at SG Hambros Bank Ltd. in London. “We have the conditions in place for seeing this rally continuing. The economy is recovering at a global level.”

The benchmark gauge for American equities will rise 9.3 percent to 1,374 in 2011, bringing the increase since 2008 to 52 percent, according to the average of 11 strategists in a Bloomberg News survey.

Chevron fell 0.4 percent to $91.25. Hewlett-Packard, the world’s largest computer maker, retreated 0.4 percent to $42.10.

CVS Caremark lost 0.7 percent to $34.77. The drugstore operator said it will acquire the Medicare Part D business of Universal American Financial for about $1.25 billion. Universal American surged 40 percent to $20.45.

Borders, Alcoa

Borders slumped 22 percent to 90 cents. The second-largest U.S. bookstore chain dropped the most in almost 20 months after saying it delayed payments to some publishers while trying to avert a liquidity crisis.

Alcoa, the largest U.S. aluminum producer, rose 1.2 percent to $15.39.

Imax Corp. rallied 4.5 percent to $28.07. Sony Corp. may be preparing to bid more than $40 a share for the company that designs and makes giant-screen movie theaters, the Daily Mail reported, citing London traders. Walt Disney Co. may also be interested in bidding for Imax, the newspaper said. Speculation Disney might buy Imax is “pure fiction,” Barron’s reported, citing an unidentified person close to Disney.

Education stocks declined after Bloomberg News reported that for-profit colleges are charging more than community colleges while doing less for poor and minority students.

Apollo Group Inc. slipped 0.5 percent to $39.49. ITT Educational Services Inc. dropped 3.1 percent to $63.69.

Casino stocks advanced after UBS AG said Macau’s casino revenue surged to as much as $2.37 billion this month, matching its record in October. Wynn Resorts Ltd. added 2.1 percent to $103.84. Las Vegas Sands Corp. rose 3.5 percent to $45.95.

--With assistance from Adam Haigh in London and Lu Wang in New York. Editors: Joanna Ossinger, Nick Baker

To contact the reporter on this story: Nikolaj Gammeltoft in New York at [email protected].

To contact the editor responsible for this story: Nick Baker at [email protected].