NEW YORK ( TheStreet) -- Stocks fell Monday, but finished the day well off of intraday lows, as investors warily eyed a possible resolution on Greek debt talks and soaring Portuguese borrowing costs.
The Dow Jones Industrial Average closed down 6.7 points, or 0.05%, at 12,654 after coming back from a 1% drop earlier in the day. The S&P 500 slid 3.3 points, or 0.3%, to 1,313. The Nasdaq was down 4.6 points, or 0.2%, at 2,812.
Portuguese bond yields were moving higher, sparking concerns that the country would also need a second bailout like Greece. Yields on the ten-year bond had surged more than 200 basis points to 17.26% Monday.
"At this rate, Portugal is going to move from the back to front burner in very, very short order," wrote Dan Greenhaus, chief global strategist with BTIG, in a note.European Union leaders meet in Brussels Monday for their first summit of 2012 to finalize steps for a rescue fund of $661 billion to be up and running later this year. Greece and its private creditors, meanwhile, signaled they would agree on a deal in which investors will accept a bigger cut on their government debt holdings. The two sides are "close" to an agreement following three days of talks in Athens, according to Bloomberg. Only when the debt swap in Greece is resolved can the country receive a second bailout from the International Monetary Fund and other European creditors, which would help Greece avoid a default. The Greece government is under growing pressure to work out a deal given that it faces a €14.5 billion bond payment on March 20. Also, before the country gets fresh funding, Germany is insisting that Athens give up some control over its budget policy. In Europe, French bank shares were pressured after President Nicolas Sarkozy said he would impose a financial-transaction tax. A reading on consumer sentiment in the eurozone rose less than expected, according to the European Commission in Brussels. Germany's DAX closed down 1.2% while London's FTSE lost 1.1%. In Asia, China signaled that it would hold back from further monetary easing, in particular by leaving bank reserve requirements unchanged. Japan's Nikkei Average settled 0.54% lower and Hong Kong's Hang Seng lost 1.66%. Meanwhile, economic data suggested that demand may slowdown as U.S. consumers seek to boost their savings. The Department of Commerce reported that U.S. personal income rose 0.5% in December, beating an estimated 0.4% increase, according to Thomson Reuters, and adding to a 0.1% increase in the prior month. However, in the same report, spending was flat after a 0.1% increase in November. No other major economic news was expected Monday, although investors are looking forward to the government's unemployment report for January at the end of the week. With two trading days left in January, the Dow, up 3.6% for the month, is on pace for its largest monthly percentage gain since 1997. The index, down 0.5% last week, saw its first week of losses in 2012. The melt-up in the market has lost some steam in recent sessions, although many analysts say that investors will likely take this as a buying opportunity. "Stocks overall remain very resilient, permitting the banks to correct about 3%
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