Financials Skid; Oil Boosts Energy Stocks

An early dollar-fueled rally fizzled, leaving stocks wobbling, as oil resumed its ascent and weakness in financials seeped into the broader market.

Anticipation of the Federal Reserve's rate decision this week also kept traders on edge.

The market's gyrations follow a dismal week in which a concoction of rumors and bad news shook up the banking sector and the Dow industrials broke through the key 12000 mark.

The dollar's rallyinitially erased morning gains in oil but U.S. light, sweet crude quickly resumed its ascent, trading above $137 a barrel . That gave a boost to oil stocks, which were up more than 2 percent. ExxonMobil was the top gainer on the Dow.

The Monday morning quarterbacking on the weekend oil meeting in Jeddah, Saudi Arabia wasn't too encouraging.

"The only thing that's been achieved from this meeting is that we have a clear path to $150 and beyond," Stephen Schork, editor of energy publication The Schork Report, told CNBC.

And, the hits just keep on coming for the banking sector.

Citigroupis set to slash about 6,500 jobs in its investment banking division, the Wall Street Journal reported. Shares skidded more than 2 percent in early trading.

Not even the golden child of Wall Street is immune from the industry's ills -- Goldman Sachs is expected to cut 10 percent of its investment-banking staff this year, the Financial Times reported.

Goldman analysts also issued a recommendation to sell financial and consumer-discretionary stocks due to the economic softness and buy into energy, materials and information technology.

American International Group skidded after a weekend report in Barron's said the insurer's stock "will likely be dead money for some time to come."

Financials were the biggest decliner among 10 key S&P sector indexes, falling 2 percent.

Some investors had begun to dip their toes in the financial sector but those toes are few and far inbetween these days as strategists say there's still more to come.

"It might be a bottom on our short-term trade for the financials but I don’t think all the news is out yet," Nick Massey, VP of the Householder Group, told CNBC. "They can’t figure out what their assets are worth, how can you figure out where the bottom on the stock is?"

Outside of financials, though, the market looks attractive, Massey said. "We'll probably issue the buy signal this week," Massey said, adding that his team is looking at technology, emerging markets and health care.

Though, it won't be a straight shot up, so fasten your seatbelt.

The end of the second quarter comes a week from today and if the mood on the trading floor is any indication, it's going to go out with a whimper not a bang as a strong April and early May fizzled, leaving major indexes near their March lows.

The "C" word -- capitulation -- was tossed around the market last week but most traders and strategists said there would have to be a lot more pain for the market, which is retesting its lows for a second time this year, to hit rock bottom.

(What stocks should you be watching this week? Click on the video at left for five picks from the Wall Street Journal's Jon Hilsenrath.)

Meanwhile, all eyes will be on the Federal Reserve this week as policy makers meet for two days starting Tuesday and are expected to announce their decision on interest rates on Wednesday. Ratings agency Moody's said it's clear that rate cuts are off the agenda, according to a newspaper report.

The Fed and the European Central Bank should coordinate actions and the ECB should not raise rates at its next meeting at the beginning of July, a Moody's official told Italian newspaper La Repubblica.

Despite the Fed being expected to remain on hold, mortgage rates have been rising recently and some buyers are coming back in the market to lock in before they rise even more.

In deal news, Bunge will buy fellow agriculture company Corn Products International for $4.4 billion in stock, giving Bunge a bigger presence in commodities like corn sweeteners. Corn Products shares soared 22 percent in premarket trading, while Bunge shares also gained 3 percent.

And disposal company Republic Services said it will buy Allied Waste Industries in a $6.07 billion stock deal that would join the second- and third-largest players in the disposal industry.

This Week:

TUESDAY: Case-Shiller home-price index; Richmond Fed report; consumer confidence; two-day Fed meeting begins
WEDNESDAY: Mortgage applications; durable goods, new-home sales; weekly crude inventories; Fed rate decision; Earnings from General Mills, Monsanto, Bed, Bath & Beyond, Nike, Oracle and RIM
THURSDAY: Jobless claims; GDP (final) with corporate profits; existing-home sales; Kansas City and Chicago Fed reports; ConAgra, Lennar earnings
FRIDAY: Personal income and spending; consumer sentiment; KB Home earnings