Stocks Avoid Wild Move for a Change

NEW YORK (TheStreet) -- Stocks took a breather Tuesday following Monday's red-hot surge and finished just to the downside, though the Nasdaq Composite held largely flat, paring back afternoon gains as the market attempted to find its footing amid diminished eurozone contagion fears.

The Dow Jones Industrial Average slid 37 points, or 0.3%, at 10,748. The S&P 500 fell off by 4 points, or 0.3%, to 1156, though the Nasdaq closed nearly 1 point, or 0.03% higher, at 2375.

UBS economists Maury Harris and Drew Matus said the European Union rescue package removes a downside risk to the U.S. by stabilizing financial markets.

"Continued high levels of volatility in financial markets and tighter credit conditions throughout Europe could have reduced the willingness of firms to borrow, expand and hire, thereby short-circuiting the ongoing U.S. economic recovery," Matus said, adding that even steep moves in the exchange rate wouldn't have had a huge effect on U.S. growth via the trade balance.

"It is likely the main impact would have come through a reduced 'wealth effect' related to the equity market decline in the U.S. and the EU crisis unfolded. Providing a partial offset to this weakness would have been lower bond yields and energy prices."

After the Dow powered to a 400-point day on the EU bailout news Monday, stocks traded above and below the flat line today. The blue-chip average traded nearly 100 points lower in the morning and nearly 100 points higher at its peak of the session before settling just to the downside.

Marc Pado, U.S. market strategist at Cantor Fitzgerald, said the weakness heading into the closing bell could be attributed, in part, to the withering euro, which dwindled from yesterday's highs.

"After popping above $1.30, the fact that [the euro] slumped back into the middle of the range was disappointing, and I think the market was taking its cues from that today," Pado said. "But, overall, you gotta be impressed after a day like yesterday that the market is holding on to those gains at all."

He added, "there's strength in the right areas ... after all the turmoil this weekend and last week, there was more focus on the domestic issues and there was a realization that things are looking better over here."

Overseas, U.K. Prime Minister Gordon Brown resigned today, allowing Conservative leader David Cameron to take the reins as head of the government in a likely coalition arrangement between his party and the Liberal Democrats.

News that China's inflation rose 2.8% in April raised some concern that the Chinese government may enact tightening measures.

Hong Kong's Hang Seng declined by 1.4% while Japan's Nikkei lost 1.1%. The FTSE in London slipped 1% lower, while the DAX in Frankfurt rose 0.3%.

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