Updated from 4:08 p.m. EDT

A week-old funk lingered for stocks Monday, as persistently high oil and nervousness ahead of a key

Federal Reserve

meeting kept buyers sidelined.

The

Dow Jones Industrial Average

lost 7.06 points, or 0.07%, to 10,290.78, while the

S&P 500

dipped 0.88 points, or 0.07%, to 1190.69. The

Nasdaq

fell 8.07 points, or 0.39%, to 2045.20. The 10-year bond was up 4/32 in price to yield 3.90%, and the dollar fell against the euro and rose against the yen.

The Dow was pressured by

Pfizer

(PFE) - Get Report

,

Alcoa

(AA) - Get Report

and

Walt Disney

(DIS) - Get Report

, all of which fell at least 1.4%.

About 1.74 billion shares changed hands on the

New York Stock Exchange

, with decliners even with advancers. Trading volume on the Nasdaq was 1.45 billion shares, with decliners beating advancers 3 to 2.

Oil rose on concerns that Iran's new government represents an obstacle to dependable exports from OPEC's No. 2 supplier. The August crude contract closed at another new record high of $60.54 a barrel, up 70 cents.

"It's not just higher oil prices, but that companies are in preannouncements as well," says Peter Boockvar, equity strategist with Miller Tabak. "We saw equities gain when oil was rising. It's the current event of oil as well as earnings substantiating a headwind. Companies may tell us that the economy not as good as we thought."

To that end,

International Paper

(IP) - Get Report

warned before the bell that second-quarter earnings will trail estimates significantly, weighed down by weak paper and packaging sales. Shares fell $1.02, or 3.1%, to close at $31.43.

Also sowing concern was profit guidance from

Cardinal Health

(CAH) - Get Report

. While forecasting a solid fourth quarter, the medical services company previewed 2006 earnings that are below Wall Street forecasts. It cited more investments in "organic growth" and margin pressure in certain lines. The stock dumped $4.08, or 6.7%, to $56.43.

Traders will get a key reading on the rate front Thursday when the Federal Open Market Committee concludes a two-day meeting in Washington. Economists expect the FOMC to raise its fed funds benchmark by a quarter point to 3.25%.

Stronger sectors Monday included energy, financials and homebuilding. Technology, semiconductors, health care and brokerages were among weaker areas.

Among the movers Monday was

Morgan Stanley

( MWD), which got a boost from reports that its former president, John Mack, might be returning as chief executive. The stock lost 7 cents, or 0.1%, to $53.05.

In earnings news,

Nike

(NKE) - Get Report

reported fiscal fourth-quarter earnings of $349.5 million, or $1.30 a share, up from $305 million, or $1.13 a share, a year earlier. Quarterly revenue rose 7% year over year to $3.7 billion. The Thomson First Call average consensus was for earnings of $1.27. Nike was lower by $3.58, or 4%, to $85.77.

Walgreen

(WAG)

also posted earnings Monday, reporting a profit of $411.1 million, or 40 cents a share, in the fiscal third quarter, up from $342.3 million, or 33 cents a share, a year ago. Sales rose to $10.83 billion as same-store sales increased 8.7%. Analysts expected Walgreen to earn 38 cents a share, according to Thomson First Call. The stock added $1.47, or 3.3%, to $45.85.

Sun Microsystems

(SUNW) - Get Report

failed to find buyers after a newspaper said the company plans to open up the source code for Java in computer server applications. The company hopes an open-source version will create a halo effect for other products. Sun was off a penny, or 0.3%, to $3.69.

Apple

(AAPL) - Get Report

traded lower after

Barron's

said existing Wall Street revenue models don't place enough weight on the threat of cell phones to the iPod. The stock was down 66 cents, or 1.7%, to finish at $37.10.

TiVo

(TIVO) - Get Report

announced that Vice Chairman Tom Rogers will replace Mike Ramsay as the company's president and chief executive as of July 1. TiVo rose 18 cents, or 2.6%, to $6.98.

In M&A activity,

NeighborCare's

( NCRX) board of directors asked the company's shareholders to reject an offer by rival

Omnicare

(OCR)

to buy the company for $32 per share. The board said that shares are trading above the $32-per-share offer, and that Omnicare should increase its offer. NeighborCare gained 19 cents, or 0.6%, to $33.47.

Drug manufacturer

Celgene

(CELG) - Get Report

announced that it will be added to the Nasdaq 100 Index before the market opens July 5. Shares dipped 27 cents, or 0.7%, to $40.42.

In ratings moves, Merrill Lynch upgraded financial firm

Legg Mason

(LM) - Get Report

to buy from neutral. On Friday,

Citigroup

(C) - Get Report

announced a $3.7 billion deal to exchange its asset-management business for the broker-dealer business of Legg Mason. Shares were higher by $1.99, or 2%, to close at $99.99.

Other names that saw heavy volume Monday included

Google

(GOOG) - Get Report

, which broke through the $300, closing up $6.85, or 2.3%, at a record high of $304.10;

Cisco

(CSCO) - Get Report

, down 1.4% to $19.03; and

Microsoft

(MSFT) - Get Report

, up a penny at $25.05.

Overseas markets were mostly lower, with London's FTSE 100 down 0.7% to 5043, while Germany's Xetra DAX slipped 0.9% to 4524. In Asia, Japan's Nikkei lost 0.3% overnight to 11,536, while Hong Kong's Hang Seng added 0.2% to 14,230.