US stocks pause from recent gains, financials retreat

Investors
slowed their hectic buying of stocks Monday, leaving the major indexes little changed after a four-day advance.
Stocks pulled back from early highs as financials, which have been surging lately, retreated. Meanwhile, Treasury prices rallied ahead of the next round of debt auctions.
Analysts had expected a pause after stocks soared last week, lifting the Dow Jones industrials 370 points. The advance picked up momentum Friday after Federal Reserve Chairman Ben Bernanke declared that the economy is on the verge of recovery.
"I think people still believe there are signs of recovery here, but it doesn't hurt to take a little bit of profits," said Alan Villalon, senior research analyst at First American Funds.
Market experts have been warning, though, the market's upbeat mood could be tested with reports this week on consumer confidence and housing. Some signs of recovery have emerged already in housing, but consumers are still struggling. Improved consumer confidence and spending is widely seen as one of the keys that could help end the recession.
"We're lining up here in advance of the data this week," said James Cox, managing partner at Harris Financial Group. "This is a good time to get out."
Bank shares gave up some of their early gains and traded mixed, weighed down by losses among regional banks. Investors have been worried that smaller banks could face significant hardships in the coming months as losses among commercial real estate loans pile up.
In a research note late Sunday, Rochedale Securities
banking analyst Richard Bove predicted that 150 to 200 more U.S. banks could fail in the current banking crisis on top of the 81 banks that have already failed this year.
The Dow rose 3.32, or less than 0.1 percent, to 9,509.28, after earlier rising as much as 82 points. The Standard & Poor's 500 index fell 0.56, or 0.1 percent, to 1,025.57, while the Nasdaq composite index fell 2.92, or 0.1 percent, to 2,017.98.
Advancing issues were slightly ahead of losers on the New York Stock Exchange, where consolidated volume came to 6.32 billion shares, up from Friday's 5.98 billion.
In other trading
, the Russell 2000 index of smaller companies slipped 1.27, or 0.2 percent, to 580.24.
Bond prices rose as investors prepared for $197 billion in auctions this week. The yield on the benchmark 10-year Treasury note fell to 3.48 percent from 3.57 percent late Friday, while the yield on the three-month T-bill fell to 0.15 percent from 0.16 percent.
The markets have been choppy as investors react to mixed economic data, but managed last week to post four straight advances. The Standard & Poor's 500 index is up 52 percent since early March.
"We still think there is a lot of fear out there," said Ryan Detrick, chief technical strategist at Schaeffer's Investment Research. "The economy has to validate what the stock market has done."
Justin Golden, strategist at Macro Risk Advisors in New York, said some of the market's gains have been magnified by short-covering, in which investors have to buy stock after having earlier sold borrowed shares in a bet they would fall.
"A lot of bear investors have thrown in the towel," he said. "That shouldn't be confused with people being ultra bullish about the market."
Investors were also anxious ahead of the Conference Board's consumer confidence index on Tuesday, and the Reuters/University of Michigan report on consumer sentiment Friday. The Standard & Poor's/Case-Shiller index on home prices for June will be released Tuesday, while the Commerce Department reports on new home sales for July on Wednesday.
Japan's Nikkei stock average surged 3.4 percent, while China's main index was up for a third straight day, gaining 1.1 percent. A slide in the index last week triggered selling around the world.
Britain's FTSE 100 rose 0.9 percent, while Germany's DAX index and France's CAC-40 rose 1.0 percent.
Oil prices rose 48 cents to $74.37 a barrel on the New York Mercantile Exchange.
The dollar rose slightly against other major currencies, while gold prices fell.