By Anora Mahmudova and Barbara Kollmeyer, MarketWatch

Dow takes aim at 20,000

U.S. stocks advanced modestly on Monday as investors appeared reluctant to make big bets in a preholiday week while the main benchmarks were sitting near all-time highs set last week.

Investors are training their attention on a speech by Federal Reserve Chairwoman Janet Yellen this afternoon.

The Dow Jones Industrial Average was trading up 42 points, or 0.2%, at 19,886, struggling to break the psychologically important 20,000 level.

The blue-chip index has outperformed other benchmarks year to date, up 14% after marking the longest weekly run of gainssince November 2015 last week.

The S&P 500 index was up 5 points, or 0.2% at 2,263, with eight of the 11 main sectors trading higher. Real estate shares were leading gains, up 0.9%, followed by telecoms and technology sectors, up about 0.7%. Financials and energy shares, which are among the best performers this year, pulled back about 0.5%.

Meanwhile, the Nasdaq Composite Index added 30 points, or 0.6% to 5,467.

Some analysts suggested that a two-month rally on Wall Street has been overdone.

"Short-term overbought conditions are likely to lead to a pullback in the weeks ahead," wrote Katie Stockton, chief technical strategist at BTIG, implying that the market's euphoria has driven stocks too far, too fast and that patience in adding to exposure to large-cap stocks is needed.

A speech by Fed's Yellen, scheduled for 1:30 p.m. Eastern Time at the University of Baltimore on "The State of the Labor Market" will mark the last of thecentral bank's speeches before the Christmas break and will be followed for any additional guidance on monetary policy. Her speech comes less than a week after the Fed raised interest rates for only the second time in about a decade and indicated a faster pace of rate hikes in 2017 than had previously been expected.

Last week, Friday marked a weaker session for stocks (http://www.marketwatch.com/story/dow-set-to-edge-closer-to-20000-even-as-other-markets-take-a-breather-2016-12-16) after reports of a Chinese warship had seized an underwater U.S. Navy drone.

Beijing has since agreed to return the drone, but analysts said the diplomatic spat highlights growing tensions in China-U.S. relations in that region, which could prove disruptive to Wall Street trade.

"While no one expects the USA and China to be best friends, moving away from the current status quo into a frosty relationship could provide an unwelcome backdrop for markets," said Rebecca O'Keefe, head of investment at stockbroker Interactive Investor, in a note to clients.

Read:Trump's Twitter slip declares China's drone seizure 'unprecedented' (http://www.marketwatch.com/story/trumps-twitter-slip-declares-chinas-drone-seizure-unpresidented-2016-12-17)

Some still believe the stock markets may not get a so-called Santa Claus rally (http://www.marketwatch.com/story/why-the-stock-market-may-not-see-a-santa-rally-this-year-2016-12-17) in the last trading days of 2016 because of the intensity of its recent rise.

Stocks to watch: Canada-based insurer Fairfax Financial Holdings Ltd.(FFH.T) has agreed to acquire (http://www.marketwatch.com/story/insurer-fairfax-agrees-to-buy-allied-world-in-49-billion-deal-2016-12-19) Swiss peer Allied World Assurance Co.(AWH) in a $4.9 billion cash-and-share deal. Fairfax shares fell 2.3%, but Allied shares jumped 12%.

Standard Industries Inc. on Sunday reached an agreement (http://www.marketwatch.com/story/standard-industries-to-buy-german-roof-maker-braas-monier-for-115-billion-2016-12-18) to buy German roof maker Braas Monier Building Group SA(BMSA.FF). Standard is the U.S.-based owner of North America's biggest roof maker, GAF Materials Corp. Braas shares rose 6.8%.

Walt Disney Co.(DIS) was up 1.7% after "Rogue One: A Star Wars Story" hauled in an estimated $155 million (http://www.marketwatch.com/story/rogue-one-has-a-blockbuster-opening-weekend-2016-12-18) in the U.S. and Canada at the box office over the weekend. The takings were the second biggest ever for a December opening.

Lennar Corp.(LEN) reported an 11% jump in fourth-quarter profit (http://www.marketwatch.com/story/lennar-profit-jumps-11-in-q4-beats-forecasts-2016-12-19), beating forecasts. Shares advanced 2.8%.

Iran officials warned on Sunday that if U.S.-President-elect Donald Trump tries to scuttle the country's deal to buy 80 jets from Boeing Co(http://www.marketwatch.com/story/iran-warns-it-will-seek-payments-if-trump-scuttles-boeing-deal-2016-12-18).(BA) it will take action to recover lost payments. Boeing shares rose 1.1%.

Other markets: Asian markets closed mostly lower, while European stocks pulled back from 2016 highs (http://www.marketwatch.com/story/european-stocks-drop-from-2016-high-as-banks-pause-for-breath-2016-12-19) as banks took a breather from a recent rally.

Crude prices (http://www.marketwatch.com/story/oil-prices-start-the-new-week-with-gains-and-a-focus-on-production-cuts-2016-12-19) fell 10 cents to $52.85 a barrel, while gold for February added $4.9 to $1,142.30 an ounce.

The dollar (http://www.marketwatch.com/story/dollar-slips-as-investors-cash-in-on-recent-gains-2016-12-19) index pulled back modestly, as investors took a pause after gains of about 1.2% last week that came on the heels of the Fed's rate increase.

(END) Dow Jones Newswires

December 19, 2016 11:34 ET (16:34 GMT)

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