Stocks traded lower in thin trading Monday amid a lack of economic news and as investors cautiously awaited the start of earnings season.
Among Dow components, Travelers and Kraft gained, while Chevron slipped.
The S&P 500 and the tech-heavy Nasdaq both declined. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.
Among key S&P sectors, consumers staples rose, while energy and utilities declined.
"The stock market 'feels' as if it needs to consolidate its gains, and rebuild its internal energy, before moving higher," Jeffrety Saut, chief market strategist at Raymond James, said in a note to clients on Monday.
That, he wrote, "implies more of the churning action we experienced last week."
Saut expect the S&P 500 index will be contained in the 1,320 to 1,325 range. If that range doesn't hold, the next support level is a 1,305. "Whatever the near-term outcome, we believe it would take some major 'news shock' to break the SPX below the massive support now visible at 1275-1300," Saut wrote.
"Everybody is focused on earnings and that's really it," said Rick Fier, vice president at Conifer Securities. "Clients are under the impression that the easiest money has been made in the market, and that stock picking will be much more of an issue in the next quarter or two, and that comps for these companies will be harder to achieve."
As earnings are released, investors will be zeroing in on how companies anticipate rising commodity prices, and the multiple disasters in Japan, will affect their results in the future, he said.
Earnings season could be volatile because the market isn't showing a clear direction heading into the releases, he said. Investors now are trimming back positions, and getting ready for earnings to provide some clarity on the market's direction, which he said won't come for another two weeks.
Alcoa, the world's leading aluminum producer, unofficially opens earnings season when it releases results after the market closes. The company is expected to report quarterly earnings of 27 cents per share on revenue of $6.07 billion, according to Thomson Reuters.
JPMorgan Chase , Bank of America and Google will report earnings later in the week.
Google traded flat after Oppenheimer reduced its 2011 margin assumptions for the search engine giant. The brokerage said, however, that first quarter results could mark a bottom in the stock. IBM also fell after Canaccord Genuity cut the tech giant to "hold" from "buy."
Meanwhile, JPMorgan shares also traded flat to lower after news the banking giant was accused of breaking its duty to clientsby not warning clients with $500 million in an investment vehicle despite red flags warning it could collapse.
Commodities continued to trade at high levels amid concerns about inflation, global unrest and monetary policy in the U.S. Gold slipped from its highs but remained at lofty levels of $1,467.40 an ounce, as silver hit a new 2011 high, settling at $40.60 an ounce.
The dollar fell, against a basket of currencies, which was contributing to the rise in precious metals.
Oil prices slipped, but were still at high levels, as the African Union engaged in talks to end the fighting in Libya. London Brent crude fell 2.1 percent to close at $123.98 a barrel, while U.S. light crude fell 2.5 percent to $109.92 a barrel.
Oil companies were largely lower, led by Denbury Resources , Occidental Petroleum and Anadarko Petroleum .
A handful of of M&A deals grabbed the market's attention. Nasdaq OMX Group and IntercontinentalExchange are not going to walk away from their bidfor NYSE Euronext , despite the NYSE board's rejection of the unsolicited offer, according to people familiar with the matter. NYSE Euronext chose its deal with Deutsche Boerse over a higher, rival joint takeover offer from Nasdaq and ICE.
Global Crossing skyrocketed after news that Level 3 will buy the communications company for $23.04 a share, in a tax-free, stock-for-stock deal.
And Endo Pharmaceuticals has reached a definitive agreement to buy American Medical Systems , which sent its stock soaring. Endo will buy AMS for $30 a share, or $2.9 billion in cash, including the assumption and repayment of $312 million in AMS debt, the Wall Street Journal reported.
Tyco jumped after news the diversified industrials products maker is a potential takeover target by Schneider Electric.
And Tasty Baking shares soared more than 140 percent to lead the Nasdaq following news the bakery company will be acquired by Flowers Foods in a $34.4 million cash deal.
Biogen gained after news a drug for multiple sclerosis that it developed met its goal in a study.
Meanwhile, Tenet Healthcare said it has sued its suitor, Community Health Systems, claiming the rival hospital operator improperly admitted patients to overbill insurers including Medicare. Community Health shares were last down more than 30 percent, but the stock halted trading four times due to single stock circuit breakers following the news.
The market cheered news that a compromise budget agreement was reached on $38 billion in spending cuts late Friday. President Obama will deliver a long-term plan for deficit reduction on Wednesday, according to Reuters, as the White House and Congress prepare to concentrate on the 2012 fiscal year budget and on raising the $14.3 trillion limit on government borrowing authority.
Meanwhile, a 7.1-magnitude tremor triggered a tsunami warning, and forced the evacuation of workers from the crippled Fukushima nuclear plant on Monday, exactly a month after the quake and tsunami caused devastation in the country.
European shares fell from five-week highs.
On Tap This Week:
MONDAY: Earnings from Alcoa and Chevron's interim results after the bell.
TUESDAY: International trade, import and export prices, 3-year Treasury note auction, Treasury budget, CFTC's Gensler testifies on derivatives regulation, Dudley speaks, Bank of NY Mellon shareholder meeting
WEDNESDAY: Weekly mortgage applications, retail sales, business inventories, oil inventories, 10-year Treasury note auction, Beige Book, United Technologies shareholder meeting; earnings from JPMorgan before-the-bell.
THURSDAY: Weekly jobless claims, PPI, 30-year Treasury bond auction, Kocherlakota speaks, Plosser speaks, Lacker speaks, Nestle shareholder meeting; earnings from Hasbro before-the-bell and Google after-the-bell.
FRIDAY: CPI, Empire state manufacturing survey, Treasury international capital, industrial production, consumer sentiment, credit card default rates reported; Evans speaks, Hoenig speaks, G24/International Monetary Affairs meeting; Earnings from Bank of America and Mattel before-the-bell.
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