Stocks added to losses as investors took profits from last week's massive rally and worried over the state of some leading banks..
Major indexes moved modestly lower, as National City, the No. 10 U.S. bank, said it is close to a capital infusion of up to $7 billion. While the move would give the bank operating room, the infusion will be dilutive to shareholders, who responded by sending the stock sharply lower.
Also, In earnings, Bank of America the second-largest US bank, badly missed analyst expectations as it said first-quarter profit fell, hurt by write-downs and rising credit losses.
Net income for the Charlotte, N.C.-based company fell to $1.21 billion, or 23 cents per share, from $5.26 billion, or $1.16, a year earlier. That was far below analyst estimates of 41 cents per share and a steep drop from the $1.17 a share profit from the same quarter a year ago.
Shares were trending slightly lower as investors viewed the bank's decision not to lower its dividend as at least some cushion against the otherwise poor performance.
Some thought the market may be trying to catch its break after a week in which the indexes gained about 4 percent and threatened to break through a trading range and out of bear territory.
"We may want to consider that the market might take a break here," said Linda Deussel, equity market strategist at Federated Investors. "We're at the high end of the range, and until we pierce through on the upside I'm not preapred to say we're in anything but a sideways environment."
Pharmaceuticals also were likely to have a strong effect on trading during the day. Dow component Merck brought some needed relief to the market as the pharmaceutical beat analyst estimates, helped by the strength of its deal with competitor AstraZeneca.
Shares of Novartis climbed after it reported a 10 percent jump in quarterly profit, topping expectations.
Drug maker Eli Lilly also reported results before the bell, disappointing Wall Street with earnings slightly below projections. And Morgan Stanley analysts said Monday that biotech Genentech's Avastin could face big competition from ImClone's Erbitux for treating lung cancer.
Mattel shares were down sharply after the largest US toymaker said domestic sales for the Barbie doll were down 12 percent in the first quarter, while fellow toymaker Hasbro was heading in the other direction after reporting sold earnings and reaffirming its outlook.
Apple posted a solid gain after Citi reiterated its buy rating for the manufacturer of the Apple and iPhone maker. And small-cap software supplier Packeteer saw its shares soar on high volume after news that it would be bought by Blue Coat Systems.