Stocks Lose Steam, Close Nearly Flat

A possible cash infusion for WaMu and anticipation of the earnings season helped lift the major indices earlier. Frank Curzio reviews the action in The Real Story (above).
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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) - Get Report

, 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) - Get Report

, 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) - Get Report

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) - Get Report

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) - Get Report

, for example, announced it's buying

Nestle's

25% stake in

Alcon

(ACL)

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) - Get Report

spiked 5.5% after agreeing to

snap up

Diners Club International from

Citigroup

(C) - Get Report

for $165 million. Citi shares advanced 2.2%.

Yahoo!

(YHOO)

fell 2.3%, however, after

rebuffing

Microsoft's

(MSFT) - Get Report

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) - Get Report

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) - Get Report

to buy from hold, pushing shares up 6.6%.

Among other actions,

Applied Materials

(AMAT) - Get Report

shed 3.4% on a Credit Suisse downgrade to neutral from outperform. Women's-apparel maker

Ann Taylor

(ANN)

and makeup company

Estee Lauder

(EL) - Get Report

were cut to neutral ratings at Piper Jaffray and UBS, respectively. Shares slipped 6.5% and 2.6%.

Also,

Motorola

(MOT)

gained 1.8% amid news that the cell-phone maker will

end its long battle

with activist shareholder Carl Icahn.

Keith Meister, a managing director of Icahn investment funds, has been installed as a Motorola director, and the company has agreed to take input from Icahn regarding its plan to

split itself in two

. The sides have agreed to dismiss all pending litigation.

Both Meister and William Hambrecht, CEO of WR Hambrecht + Co., will be put on the company's 2008 proxy statement as nominees for election to Motorola's board. Icahn nominated Hambrecht for a seat earlier this year without company support.

On the economic docket, the

Federal Reserve

said that consumers carried a lower-than-expected $5.2 billion in debt in February. That compares with $10.3 billion in January -- which was revised sharply upward -- and a consensus estimate of $6 billion.

The major overseas markets were mostly higher. Tokyo's Nikkei 225 tacked on 1.2% overnight, and the Hang Seng in Hong Kong climbed 1.3%. In Europe, London's FTSE, Germany's Xetra Dax, and the Paris Cac were all up 0.9% or more.