The Dow erased nearly all of its gains Monday, dragged down by the financial sector amid worries about financial reform.
The Dow had been higher for much of the day amid a flurry of new M&A activity and an earnings beat from Caterpillar, but wound up finishing up less than one point.
Travelers , JPMorgan and Bank of America all lost more than 2 percent.
The S&P 500 and Nasdaq both finished lower. Marshall & Isley was the biggest drag on the S&P, down more than 5 pecent, while PNC Financial took the biggest toll on the Nasdaq 100, down more than 4 percent.
The Dow's gain may have been tiny but it still helped extend the blue-chip index's winning streak to a sixth straight session. The Dow and the Nasdaq now have eight consecutive weekly gains.
Market pros pondered whether the rally can continue or if it's about to retreat.
“The highest we’re going to get in the rally is 11,800 in the Dow and at that point, we’re going to see some churning and rolling over," said John Carter, president of Trade The Markets. "And then in second half of 2010 and into 2011, we’ll see a lot of weakness."
But Art Cashin, director of floor operations at UBS Financial Services, said although the rally is "long in the tooth," market technicals are "quite strong and nowhere near signaling a top."
Traders are hedging their bets: Just 28 percent said they were bullishon the market over the next six months, according to the latest survey of trader sentiment from Charles Schwab, down from 50 percent in a prior survey. And, 40 percent said they're protecting themselves against risk by trading options.
Some encouraging news on the employment front: Thirty-seven percent of firms say they plan to hire new workersthis year, compared with 29 percent in January, according to a survey from the National Association for Business Economics.
Earnings season is still in full swing this week with 164 S&P 500 companies set to report their quarterly numbers.
Caterpillar was the biggest Dow gainer, up 4.2 percent, after the construction-equipment maker beat earnings expectations and raised its full-year outlook to $2.50 to $3.25 a share.
Whirlpool shares jumped 10 percent after the appliance maker topped forecasts and raised its full-year outlook.
Meanwhile, Humana shares were one of the biggest decliners on the S&P despite a solid earnings report: The health insurer beat expectations and raised its forecastamid an increase in Medicare enrollments.
Other health insurance firms such as UnitedHealth, WellPoint and Cigna also declined.
Texas Instruments shares rose in regular trading ahead of the chip maker's earnings. In a report after the closing bell, TI topped expectations and raised its revenue outlook.
Financials were the day's biggest decliner, down 1.7 percent, amid worries about financial regulation as the Senate moved closer to launching a debate on financial reform. Meanwhile, Sen. Richard Shelby, a Republican from Alabama, said he believes all 41 Republican senators would vote againstlaunching a floor debate on the bill, focusing instead on making changes to the bill, crafted by Sen. Chris Dodd, a Democrat from Connecticut.
Citigroup shares fell more than 5 percent after the government said it is selling 1.5 billion shares of the 7.7 billion it owns in the bailed-out bank. The sale should net a tidy profit for the government, which took its stake in Citi at $3.25 a share — the stock is currently trading at nearly $5.
Citi CEO Vikram Pandit said he's focused on developing markets, where Citi already has a foothold, to lead the company through the recovery.
"The world needs new growth drivers besides U.S. consumption and credit creation. Emerging markets offer one potentially powerful source," Pandit said in a speech on Monday at the Global Financial Forum.
Goldman Sachs shares dropped as traders continued to watch the fraud case against the Wall Street titan unfold to determine the severity of the charges — and implications for the firm's future. One of the latest details on the case is that the trader at the center of the case, Fabrice "Fabulous Fab" Tourre apparently talked about the subprime mortgage market in love letters to his girlfriend.
Banking analyst Meredith Whitney said Goldman has lost much of its competitive edge and investors should avoid the stock— she doesn't have a "buy" rating on Goldman or any of the big banks.
Meanwhile, Rochdale analyst Dick Bove said both Citi and Goldman remain good buys, despite obstacles for both companies.
Goldman Sachs executives including CEO Lloyd Blankfein and Tourre are scheduled to appear in front of a congressional committee Tuesday. Prepared testimony suggests Blankfein will tell the panel that Goldman "certainly did not bet against our clients."
Concerns about Greece's financial situation amid rising bond yieldswere hanging over the market as well as concern about Portugal as credit-default swaps there hit a record high.
The dollar roseagainst the euro as confusion about the timing and amount of emergency aid for Greece prompted investors to sell the euro. Gold heldnear $1,153.50 an ounce and oil prices fell to $84.20 a barrel.
Energy stocks were mostly flat to lower after the Federal Trade Commission said it is investigating whether some of the world's largest oil companies violated antitrust laws.
The investigation involves as many as a dozen companies including oil giants ExxonMobil , Chevron , BP and Royal Dutch Shell.
Tech stocks were also weak after a downgrade on Dell.
Dell shares fell 2.7 percent, making them one of the biggest drags on the Nasdaq 100, after Standpoint Research slashed its rating to "hold" from "buy," saying the firm is now fairly valued.
Other large-cap techs were also lower, including Google and Research In Motion .
Meanwhile, Home Depot and Lowe's ended mixed after Deutsche Bank raised its price targets on the two home-improvement giants. A new AmEx survey shows a resurgence in home-improvement projects: 62 percent of homeowners said they planned to embark on home-improvement projects in 2010, spending an average of $6,200 on enhancements.
More news on the M&A front today: Hertz agreed to buy rival Dollar Thrifty for about $1.2 billion, in a major consolidation move for the rental-car market.
Consolidation was also a key theme in the airline sector, with talks between UAL and Continental continuing about a possible merger. The deal may have hit a potential snag over the price of a proposed stock swap deal, according to published reports.
And Stifel Financial has agreed to buy buy Thomas Weisel Partners, a high-tech investment bank, in a stock deal valued at $300 million.
Volume was decent, with 1.22 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 8 to 7.
No major economic numbers are set for release Monday, although the rest of the week is quite busy, with a two-day Fed meeting starting on Tuesday and reports on GDP and consumer sentiment later in the week.
This Week:
MONDAY: Earnings from Texas Instruments after the bell
TUESDAY: 3G iPads to ship; Goldman execs. testify before Senate; two-day Fed meeting begins; Earnings from DuPont, Ford, 3M, US Steel, Broadcom
WEDNESDAY: GE and BofA shareholder meetings; Weekly mortgage applications; Weekly crude inventories; Fed announcement (2:15 PM ET); Earnings from Comcast, ConocoPhillips, Corning, Sprint, Visa
THURSDAY: Weekly jobless claims; Earnings from ExxonMobil, P&G, Aetna, Bristol-Myers Squibb, Burger King, Kellogg, Motorola, Time Warner Cable, Viacom
FRIDAY: Berkshire Hathaway annual meeting; AT&T shareholder meetings; GDP; consumer sentiment; Earnings from Chevron
—Send comments to cindy.perman@nbcuni.com.
