Stocks declined Monday as the dollar gained after a warning from Moody's on the U.S. and other nations with AAA debt ratings and amid worries about China tightening.
Financials were lower amid jitters over financial reform but didn't take any additional hits from Sen. Christopher Dodd's unveiling of his financial-reform bill.
The bill is more moderate than prior draftsin an attempt to gain GOP support. Its main goals include ending too big to fail and creating an independent watchdog to protect consumers. There appears to be some form of the Volcker rule in the bill, which would curb proprietary trading.
Earlier today, Republican Richard Shelby said the GOP would meet Democrats "at least halfway" on any legislation.
President Obama emphasized that any bill must include independence for that consumer watchdog group and give it the power to oversee nonbank firms such as debt collectors.
AIG has been all over the map today, up in the morning, then down midday. The stock spiked 5 percent this afternoon. Bruce Berkowitz, head of Fairholm Capital Management, said he thinks AIG is "still a good company" and bought "significant" stakes in the company's shares, convertible debt and bonds, according to a Bloomberg report.
Earlier, AIG announced that it will hold back $21 million in retention bonuses from current and former employees of its financial-products unit. The cuts may help AIG lessen the outcry over bonuses paid to workers of the unit seen as responsible for its near-collapse in 2008.
Health-care reform was also in focus this week as Democratic leaders try to muster enough support to pass a health bill without Republican help.
President Obama delivered an emotional closing argument for health-care reform today in hopes of getting a vote in Congress by the end of the week.
This comes after stocks hit a 17-month highlast week as investors continued to bet on the consumer recovery and techs, and really took a shine to financials.
As investors try to play the recovery, placing their bets on stocks and sectors, some interesting advice this morning from Pimco's Mohamed El-Erian.
El-Erian suggests investors keep a nice chunk of cash on handto make investments "as the future gets clearer."
"This is a wonderful time to be an active manager, with all these things moving," El-Erian said on CNBC this morning. "We are in the midst of a paradigm shift where things happen but they don't happen in the linear fashion that everyone wants them to happen."
So, expect the unexpected — and keep some cash around so you can trade accordingly.
Moody's said its AAA ratings on the U.S. and other nations remain intact but warned that credit risks have grown.
The dollar advanced as investors turned to the U.S. currency as a safe-haven bet against potential credit hazards. That pushed commodities such as oil and gold lower.
Chevron and ExxonMobil were among the biggest decliners on the Dow, along with Boeing and Caterpillar.
Elsewhere in the energy sector, Consol Energy tumbled after the Pittsburgh company agreed to buy some assets from Dominican Resources for $3.48 billion.
Also today, the Treasury reported that foreign investors, led by central banks, were net sellers of U.S. securities in January but continued to buy US Treasurys. China remained the biggest holder of U.S. debt at $889 billion, followed by Japan with $765.4 billion.
Adding to the pressure on stocks this morning were worries that China could start tightening its monetary policy after a higher-than-expected inflation reading there last week.
And, of course, investors typically stay in a holding pattern ahead of a Fed meeting. Policy makers are holding a one-day meeting on Tuesday. They aren't expected to change rates or remove the famous "extended period" language from their statement, but change of a different sort is expected.
An analyst upgrade on Wal-Mart helped to curb the market's losses.
Wal-Mart jumped over 2 percent, making it the best performer on the Dow, after Citigroup raised its rating on the stock to "buy" from "hold," citing the discount giant's potential for grabbing market share from supermarkets without sacrificing margins.
Citi also raised its price target on the stock to $65; the stock is currently around the mid-50s.
"WMT is lacing up the gloves in the fight to win the modern day price war in food retail in 2010," Citi analyst Deborah L Weinswig wrote in her research note on the stock.
Boston Scientific shares tumbled over 10 percent percent, the biggest drop for the stock in 17 months, after the company said it is indefinitely suspending sales of its implantable cardioverer defibrillator devices following a documentation error in its regulator filings, an analyst at Sanford Bernstein Research reported on Monday.
Pepsi shares climbed more than 1 percent after the soft-drinks maker announced plans to buy back $15 billion of its shares.
Google shares were down nearly 4 percent after a weekend report from the FT that the company was "99.9 percent" sure it would shut its Chinese search engineafter censorship talks with the government broke down.
Toyota rose after a probe questioned a driver's account of a "runaway Prius." Investigators apparently test-drove the car in question and weren't able to duplicate the problem. Plus, the brakes apparently didn't have wear consistent with the driver's allegations.
In the day's economic news, the Empire State Manufacturing Index slipped to 22.86in March, slightly better than expected.
Industrial production ticked up 0.1 percent in February, roughly in line with expectations, while capacity utilization rose to 72.7 from 72.5.
And homebuilder sentiment slipped in March, hurt by harsh winter weather and foreclosures, according to a report from the National Association of Home Builders.
Some good news on the consumer front: Credit-card delinquencies slippedin February, according to reports from major card providers including Capital One and Bank of America .
Royal Dutch Shell says it and PetroChina are still in talks to acquire Arrow Energy, despite a report indicating that Arrow is likely to reject an offer.
Also in deal news, Phillips-Van Heusen said it is nearing a deal to acquire clothing manufacturer Tommy Hilfigerfor about $3 billion.
TUESDAY: Bear Stearns anniversary; import/export prices; housing starts; Fed meeting (statement at 2:15pm ET)
WEDNESDAY: OPEN meeting; weekly mortgage applications; PPI; weekly crude inventories; St. Patrick's Day
THURSDAY: CPI; weekly jobless claims; Fed's Hoenig, Lacker & Pianalto speak; current account; leading indicators; Philly Fed; earnings from FedEx; March Madness begins
FRIDAY: Quadruple witching; S&P index rebalancing
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