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Stocks Pull Back as Financials Lose Steam

Stocks retreated Monday as investors took a breather after last week's run.

The Dow Jones Industrial Average was down over 100 points, or more than 1 percent, in early trading as banks declined.

Stocks jumped 4.4 percent last weekas relief over the stress-test results sent banks soaring.

After a better-than-expected payrolls report on Friday, a survey out Sunday suggested the U.S. economy will resume growing in the third quarter.

Still, analysts said be wary of the recent rally.

"We're going to run out of steam," Manus Cranny, market commentator from MF Global, said. "We've had a fantastic 9-week run, nothing lasts forever."

On Monday, several institutions announced plans to sell shares to repay government funds through the Troubled Asset Relief Program.

Among them were Capital One Financial, US Bancorp, BB&T and Principal Financial Group, all down more than 5 percent.

The dollar rose from its recent 7-week lows against the euro as investors became more risk averse once again.

And according to a weekend report in the Wall Street Journal, the Federal Reserve reduced the estimated size of banks' capital deficitsafter at least half of the 19 banks being tested balked at the Fed's calculations.

Among the moves, Bank of America's shortfall was reduced to $34 billion from about $50 billion and Citigroup's was slashed to $5.5 billion from $35 billion.

Wells Fargo and Morgan Stanley quickly addressed their capital needs by issuing stock offeringsFriday.

Richmond Federal Reserve President Jeffrey Lacker on Monday called for government protection of the financial industry to be rolled backbecause it had encouraged excessive risk taking at the heart of the current crisis.

"The financial safety net, especially those parts that were more implicit and perceived than explicit and written into the laws, played a significant role in the accumulation of risks that ultimately led to the turmoil we are still experiencing," Lacker said.

Investors will be keeping an eye on a speech about the financial system by Fed Chairman Ben Bernanke after the closing bell for insight on what's ahead for banks. He's speaking at an annual Atlanta Fed conference on financial markets.

Tech stocks were sharply lower after Citigroup on Monday upgraded its rating on the software and services sector to "overweight" from "market weight" and downgraded chips and chip equipment to "market weight" from "overweight." But IBM and AMD rose.

On the earnings front, Warren Buffet's Berkshire Hathaway posted its irst quarterly loss since 2001.

General Motors CEO Fritz Henderson said in a conference call that GM has an "urgent" need for funding for its European operations and that it would start notifying U.S. dealers about closures this week.

The Detroit News reported that GM will shift more production of U.S.-bound vehicles from Europe, Canada and Australia to cheaper labor countries, such as China, South Korea and Mexico. GM will also reportedly limit its total imports to one-third of its domestic sales.

Separately, the Wall Street Journal reported GM has hired an executive search company to help find replacements for half the board by summer.

There are just a few earnings out this week, including Wal-Mart and several other major retailers. In the coming week, retail sales are perhaps the most anticipated data point. Consumer prices and confidence are due out on Friday.

This Week:

MONDAY: Fed's Bernanke speaks; Earnings from Dish network
TUESDAY: Fed's Lockhart speaks; trade balance; federal budget; Earnings from Nissan, Applied Materials
WEDNESDAY: Weekly mortgage applications; retail sales; import prices; business inventories; weekly oil inventories; House hearing on AIG; Earnings from Macy's, Whole Foods
THURSDAY: PPI; weekly jobless claims; House hearing on the insurance industry; Earnings from Wal-Mart, Kohl's, Nordstrom
FRIDAY: CPI; industrial production; consumer sentiment; Earnings from JCPenney, Abercrombie

Send comments to cindy.perman@nbcuni.com.