Stocks finished mixed as an early rally fizzled and weakness crept into techs, retail and housing.
The Dow Jones Industrial Average and S&P 500 index managed modest gains but the tech-heavy Nasdaq closed lower.
The pullback was a simple matter of profit-taking after the run-up the market has had since mid-March, said Alan Lancz, president of an investment-advisory firm that bears his name in Toledo. "We were due for a pullback," Lancz said. "If we go straight up, without a pullback, that would worry me more -- that it's not sustainable."
Earlier, an uptick in leading indicators offered investors a modest confirmation of the optimism they've been trading on.
Leading indicators rose 0.1 percent for a second straight monthin April following five months of decline, according to the Conference Board.
"The news today is actually good," Hugh Johnson, chief investment officer at Johnson Illington Advisors in Albany, said of the leading-indicators report. "It confirms what financial markets have been saying since the middle of March ... that the economy and earnings will recover in the second half."
"It's not a strong signal," Johnson said. "Not an overwhelming signal. Not a convincing signal -- but it's better than nothing."
Crude oil continued to push through the top end of its range, settling at $127.05 a barrel, up from the previous record of $126.29 a barrel set on Friday.
High oil prices fueled concerns about the weary consumer and the impact on the economy.
"It looks to me like the consumer is trying to stay alive but there are some signs of exhaustion starting to build up," Art Cashin, director of floor operations for UBS, told CNBC. "The next three to six months, I think the market tries to punch through the upper end of the range," he said, but added, "I think they probably don't make it." Cashin said he thinks the Federal Reserve might even cut rates again, instead of preparing to begin raising them, as many expect.
In Monday's market action:
Home-improvement retailers skidded after Lowe's beat earnings expectations but issued a cautious outlook for the rest of the year. Shares dropped 2.6 percent.
Shares of rival Home Depot skidded 0.8 percent ahead of its earnings report, due out Tuesday.
Homebuilders also declined, with KB Homes falling 4.2 percent and Lennar down 3.5 percent.
Retail stocks fell, with notable declines in Wal-Mart , off 1.1 percent, and department-store operators including JCPenney , which fell 2.3 percent.
Hewlett-Packard again advanced after taking a beating early last week over its proposed acquistion of IT-services firm EDS . Shares gained 1.2 percent.
General Motors rose 0.9 percent amid hopes that a three-month strike at parts maker American Axle may soon be over. The UAW is putting to a vote a contract that would cut wages by nearly 40 percentand close three plants, while offering buyouts of up to $140,000.
Microsoft was the biggest drag on the Dow, falling 1.8 percent, followed by JPMorgan , which shed 1.2 percent.
The Microsoft-Yahoo saga took another turn as Microsoft proposed an alternative dealto Yahoo , which involved buying Yahoo's search business and taking a minority passive stake in the company. Details have yet to be ironed out, but earlier reports suggested that this may not be a full-on acquisition but Microsoft is reserving the right to change its mind on that front at any time.
Financials were mostly weaker after Citigroup analysts again slashed their outlooks for Wall Street investment firms including Goldman Sachs , Lehman Brothersand Morgan Stanley .
Transportation stocks eked out a 0.5-percent gain.
Semiconductors retreated after an earlier bounce from Goldman's upgrade on the sector to "attractive" from "neutral." The Philadelphia Stock Exchange semiconductor index finished off 0.8 percent.
There was some select buying in technology.
Shares of Amazon jumped 7.6 percent, making it the biggest gainer on both the S&P 500 and Nasdaq 100, after Goldman Sachs raised its price target on the stock and added it to its "Americas conviction buy" list.
Oracle shares rose 3.5 percent after a Barron's report suggested the stock was poised to resume a long-term ascent and that it may be considering an acquistion.
Walt Disney shares fell 0.5 percent after "The Chronicles of Narnia: Prince Caspian" was No. 1 at the weekend box office but fell short of expectations. The film's estimated three-day sales came in at $56.6 million; analysts had expected $80 million, or at least better than the first movie's $65.6-million debut.
Meanwhile, Doug Kass, who famously shorted "everything related to housing" in 2007, told Barron's he has a short position in Warren Buffett's Berkshire Hathaway, largely because the company has suffered from a drift in its investment style.
This Week:
TUESDAY: PPI; Fed's Kohn speaks; Earnings from Home Depot, Medtronic, Staples, Target and HP; Kentucky, Oregon primaries
WEDNESDAY: MBA mortgage applications; crude inventories; Fed's Warsh speaks; Fed minutes; Earnings from BJ's Wholesale
THURSDAY: Jobless claims; Fed's Kroszner speaks; Earnings from Gap; Libertarians choose presidential candidate
FRIDAY: Existing-home sales; Bond market closes early for Memorial Day holiday
Send comments to cindy.perman@nbcuni.com