Stocks Lose Steam, Close Nearly Flat

Updated from 4:11 p.m. EDT

Stocks in New York lost their strength late in the session Monday and finished little changed as investors grew jittery ahead of the kickoff of earnings season, even as word surfaced that another troubled financial name could soon get a cash injection.

After surging nearly 125 points earlier, the Dow Jones Industrial Average closed up just 3.01 points, or 0.02%, to 12,612.43 under pressure from Alcoa (AA - Cramer's Take - Stockpickr), its worst-performing component. The aluminum maker lost 4% ahead of its post-close first-quarter report, an event that is generally regarded as marking the opening of the financial-reporting season, even though the big influx of reports doesn't begin in earnest till next week.

The S&P 500 finished up 2.14 points, or 0.16%, at 1372.54, and the Nasdaq Composite ticked down 6.15 points, or 0.26%, to 2364.83.

"What a waste of time!" said Art Hogan, chief market analyst with Jefferies. "We could have just not opened at all."

"I don't think this is any surprise," he added. "We've been up significantly in the past five trading days, and there are no negative or positive catalysts out there. The market did exactly what it was supposed to do."

Regarding the pullback from the day's highs, Bruce Zaro, chief technical strategist with Delta Global Advisors, said it's possible investors temporarily surmised that the recent bounce had gone far enough. But, he noted, "I'm encouraged that this occurred early in the week, because it can still go higher over the next four days."

Pressuring tech shares was Cisco Systems (CSCO - Cramer's Take - Stockpickr), which fell 1.9% after JPMorgan slashed the networker's sales-growth estimate by 5 percentage points for fiscal 2009. Now, it's projecting a climb of just 10%.

On the blue-chip side, Arch Coal (ACI - Cramer's Take - Stockpickr) was a late-day drag after the company failed to boost its forecast for full-year profits. Shares lost 1.5%.

Fred Dickson, senior vice president and market strategist with D.A. Davidson, also believes that today's surge in oil may have caught up with investors toward the end of the day. "That's not a good sign," he said.

Indeed, as crude oil finished up $2.86 to $109.09 -- and gold futures added $13.60 to $926.80 -- the U.S. dollar slowed its gains, rising only marginally against the euro to $1.5704 while adding a fraction against the yen to 102.44. Still, the dollar index, which measures the greenback's value against a basket of major currencies, held its own to climb 0.2%.

In a somewhat positive sign for equities, Treasury prices lingered in the red even as they pared some of their losses late in the day. The 10-year note was off 22/32 in price to yield 3.55%, and the 30-year bond was down 25/32 in price, yielding 4.36%.

As for Alcoa, the company reported that its first-quarter earnings dropped by 54% to miss analyst estimates, though slipping revenue of $7.38 billion managed to beat consensus. Shares were lately up 1.4% in after-hours action after closing at $37.44.

Earlier in the regular session, the market was leaping amid reports that struggling bank Washington Mutual (WM - Cramer's Take - Stockpickr) is nearing a $5 billion cash injection deal with TPG and other investors, according to people familiar with the matter. The Wall Street Journal broke the story this morning. WaMu shares surged 29.3%.

"I think that's a big statement," said Hogan. "It's another example of somebody saying that the financials are getting overdone, that they're at bargain-basement prices."

M&A news otherwise dominated the corporate front. Novartis (NVS - Cramer's Take - Stockpickr), for example, announced it's buying Nestle's 25% stake in Alcon (ACL - Cramer's Take - Stockpickr) for $11 billion. Novartis also has an option for another 52% stake in the eye-care company for $28 billion. Alcon shares rose 1.5%, while Novartis surrendered 4.1%.

Also, credit-card company Discover (DFS - Cramer's Take - Stockpickr) spiked 5.5% after agreeing to snap up Diners Club International from Citigroup (C - Cramer's Take - Stockpickr) for $165 million. Citi shares advanced 2.2%.

Yahoo! (YHOO - Cramer's Take - Stockpickr) fell 2.3%, however, after rebuffing Microsoft's (MSFT - Cramer's Take - Stockpickr) latest attempt to get the Internet-portal operator to sign a $31-a-share takeout deal. The software company told Yahoo! that it had three weeks to agree to be acquired, warning that it's otherwise prepared to launch a proxy fight to replace at least part of the board.

Yahoo! said it isn't opposed to getting bought out by Microsoft, but that its management and many of its investors still believe the current offer undervalues the company.

Staying in the tech sector, Apple (AAPL - Cramer's Take - Stockpickr) shares rose 1.8% after Thomas Weisel upgraded the computer and iPhone maker's stock to overweight from market perform. Citigroup, meanwhile, upped chipmaking-materials maker KLA-Tencor (KLAC - Cramer's Take - Stockpickr) to buy from hold, pushing shares up 6.6%.