Stocks snapped their winning streak Monday after American Express reported that credit-card deliquencies rose in February.
That came on top of news that AIG is paying $165 million in employee bonuses, which kept an underlying tone of aggravation in the market today.
The Dow Jones Industrial Average and S&P 500 ended just a few points lower. The Nasdaq lost nearly 2 percent as big-name techs were weak throughout the session amid worries about the outlook for tech spending.
Today's drop breaks a four-day streak last week that gave all three major indexes a 10-percent boost last week, the market's best week since November.
Stocks faltered in the final minutes of trading after rallying through the day on Federal Reserve Chairman Ben Bernanke's weekend remarks that the recession could end this year fueled some optimism.
"This (economic) decline will begin to moderateand we'll begin to see a leveling off," Bernanke said during an interview on "60 Minutes" Sunday.
What traders really responded to was Bernanke's remarks about why stabilizing the financial sector is so important and that the government has to continue to be very aggressive.
In today's economic news, the Empire State Manufacturing Index found another new low in March, with a reading of minus 38.23 against expectations of minus 32.0. And industrial production fell for a fourth straight month in February, dropping 1.4 percent, more than the 1.1-percent decline expected.
American Express shares dropped more than 3 percent after the credit-card provider, in a regulatory filing, said its net charge-off rate, a measure of credit default, jumped to 8.7 percent in February from 8.3 percent in January. And the 30-day delinquency rate climbed to 5.3 percent from 5.1 percent.
Earlier, American Express had been up as much as 8 percent, riding the rally in financials.
Bank shares continued to rally, after British bank Barclays echoed comments from U.S. banks last week, saying it had a "strong start" to 2009.
And HSBC said it won't need to raise more cash— or get any more bailout money from the goverment — after its recent $18 billion rights issue.
"There's a lack of pessimism right now. A lot of worried investors had a scenario in mind that included a financial meltdown," Jack Ablin, chief investment officer at Harris Private Bank in Chicago, told Reuters.
"Given some of the statements from the banks and some other rhetoric, Fed Chairman Bernanke's appearance in a television interview, maybe investors are taking that meltdown scenario off the table," Ablin said.
Citigroup shares jumped 31 percent to end at $2.33, while Bank of America gained 7.3 percent to close at $6.18.
But the brokerages ended lower, with Goldman Sachs down 5 percent and Morgan Stanley off 9.4 percent.
General Electric ticked up to close at $9.66, after an intraday rally that pushed the stock over $10 after UBS removed the conglomerate, the parent of CNBC, from its short-term "sell" list.
Dow energy components ExxonMobil and Chevron ended flat as crude oil shed $1.10 to settle at $47.35 a barrel following news that OPEC doesn't plan to cut production.
More encouraging reports that authorities across the world were trying to contain the economic crisis came Monday, when the Nikkei business daily said the Bank of Japan is considering purchasing subordinated debt issued by banks to help bolster their capital.
But as G20 finance ministers made tentative advances during their preparatory talks at a countryside hotel south of London at the weekend, promising to raise the amount of funds available for emerging market economies that cry out for help, analysts said the group still does not have the "magic bullet" for the crisis.
TUESDAY: PPI; housing starts; Earnings from Sirius XM, Adobe; Apple preview of new iPhone software; Two-day Fed meeting begins
WEDNESDAY: Weekly mortgage applications; current account; weekly crude prices; Chicago Midwest manufacturing index; Earnings from General Mills, Oracle and Nike; Fed decision on interest rates; House hearing on AIG
THURSDAY: Weekly jobless claims; leading indicators; Philly Fed survey; Earnings from FedEx; GE to provide details on GE Capital
FRIDAY: Quadruple witching; Fed's Bernanke speaks about financial crisis at bankers' convention in Phoenix