Buyers Go Into Hibernation

Stocks close lower as bad press for Google sets a dour tone for tech.
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Updated from 4:15 p.m. EST

Stocks closed to the downside Monday as bearish news on two highflying names and worrisome comments from a

Federal Reserve

president kept buyers sidelined.

The

Dow Jones Industrial Average

lost 26.73 points, or 0.24%, to 10,892.32. The

S&P 500

fell 4.13 points, or 0.33%, at 1262.86, and the

Nasdaq Composite

dropped 22.07 points, or 0.98%, to 2239.81. All three measures closed above their session lows.

Peter Cardillo, chief market analyst with SW Bach & Co, said one of the big focuses is the inverted yield curve. "Investors will keep a very close eye on what

Fed Chairman Ben Bernanke has to say this week in order to understand the full implications of an inverted yield curve," Cardillo said.

Bernanke will be before Congress on Wednesday and Thursday to talk about the economy. The testimony, formerly known as Humphrey-Hawkins, will be Bernanke's first since he replaced Alan Greenspan as chairman of the Fed.

The 10-year Treasury bond was unchanged in price to yield 4.59% -- 9 basis points below the two-year note -- while the dollar was weaker against the yen and euro.

About 1.37 billion shares changed hands on the

New York Stock Exchange

, with decliners beating advancers by a 5-to-3 margin. Volume on the Nasdaq was 1.68 billion, and two stocks fell for each one that rose.

"There is no volume and no liquidity on this listless day," Jay Suskind, head of institutional equity trading with Ryan Beck & Co., said earlier. "A sense of a hawkish Fed cast a shadow over today."

Equities were weak all session, but some selling around midday coincided with comments from Cleveland Fed President Sandra Pianalto, who suggested the economy appears to be strengthening. Her statements renewed questions about how far the U.S. central bank will end up raising rates. Short-term rates have been raised for 14 straight Fed meetings and now stand at 4.50%.

A good bit of the weakness on the tech side was attributable to a bearish article in

Barron's

about

Google

(GOOG) - Get Report

. Critics were quoted in the story saying shares of the search giant could be halved this year because of rising competition with

Yahoo!

(YHOO)

and

Microsoft

(MSFT) - Get Report

. Google fell by $16.91, or 4.7%, to $345.70.

Another investor darling,

Genentech

(DNA)

, suspended recruitment of colon cancer patients in a study of Avastin after several patients died. The 2,000-person phase III trial has been recruiting since December 2004. Genentech lost $1.92, or 2.3%, to $81.60.

Oil eased as traders assessed a storm that dumped more than 2 feet of snow on the Northeast over the weekend. March crude finished down 60 cents to $61.24 a barrel. Natural gas fell 7 cents to $7.24 per million British thermal units, its lowest close since June 2005.

To view Gregg Greenberg's video take on today's market, click here

.

Elsewhere,

Merrill Lynch

(MER)

reportedly is in advanced talks to acquire about 49% of asset manager

BlackRock

(BLK) - Get Report

. Published reports say Merrill could trade its money-management division for the minority stake in BlackRock, which is currently controlled by

PNC Financial

(PNC) - Get Report

.

Merrill Lynch added $1.04, or 1.4%, to $73.83. BlackRock surged $10.48, or 8%, to close at $141.99.

By sector, the Philadelphia Semiconductor Sector index lost 1.4%, the Philadelphia Housing Sector index fell 0.9%, and the Philadelphia Oil Service Sector index was down 1%. Elsewhere, the Amex Oil index was higher by 0.1% and the Amex Airline index ended down 0.3%.

In earnings,

Agilent Technologies

(A) - Get Report

posted first-quarter earnings of $2.82 billion, or $5.83 a share, up from $103 million, or 21 cents a share, a year ago. Excluding items, adjusted earnings were 32 cents a share, beating the Thomson First Call consensus by 2 cents. Sales jumped 10% to $1.34 billion. Shares slid $1.42, or 4%, to $34.45.

After the close Monday,

Cendant

(CD)

will report fourth-quarter earnings, with analysts expecting a profit of 23 cents a share. On Tuesday, reports are expected from

Qwest

(Q)

,

Abercrombie & Fitch

(ANF) - Get Report

and

Deere

(DE) - Get Report

.

Xilinx

(XLNX) - Get Report

approved the additional repurchase of up to $600 million of its common stock. Shares rose 3 cents, or 0.1%, to $27.73.

Among ratings moves, UBS downgraded

Starbucks

(SBUX) - Get Report

to neutral from buy, citing a belief that there's greater potential for slowing sales growth. Starbucks lost 93 cents, or 2.6%, to close at $34.57.

Prudential raised

Nortel

(NT)

to overweight from neutral-weight, citing the belief that settlements of shareholder lawsuits will allow the company to shift its focus to generating sales and cash-flow growth. The stock tacked on a penny to $2.97.

Overseas markets were mixed, with London's FTSE 100 adding 0.5% to 5793 and Germany's Xetra DAX up 1% to 5756. Japan's Nikkei plunged 2.3% overnight to 15,878 as investors fretted about potential policy shifts at the Bank of Japan, while Hong Kong's Hang Seng lost 0.8% to 15,312.