Stocks Finish Lower, Ending Four-Day Rally

Updated from 3:37 p.m. EDT

Stocks in New York pulled back in the final hour of trading Monday, and were unable to sustain a fifth straight day of gains.

Among the headlines Monday, President Obama fleshed out a $15 billion plan to help small businesses and addressed the outrage regarding AIG bonuses.

The Dow Jones Industrial Average lost 7 points, or 0.1%, to 7216.97, while the S&P 500 was down 2.65 points, or 0.4%, at 753.90. The Nasdaq gave up 27.48, or 1.9%, to 1404.02

General Motors ( GM) retracted 8.8%, leading the Dow's decliners. But Bank of America ( BAC)and Citigroup ( C) held onto gains of 7% and 25%, respectively.

Fed Chief Ben Bernanke reiterated his forecast Sunday night on "60 minutes" that the recession would probably end this year if efforts to stabilize and reinvigorate shaky banks are successful, although that's a difficult task.

One of the poster children for federal bailouts, AIG ( AIG), which reported the largest corporate loss in history, said it will pay hundreds of millions in bonus payments for executives and employees. The beneficiaries include those at a business unit that was responsible for losing $40.5 billion last year and positioned the company to have to take $173.3 billion in federal aid.

"This is a financial company that finds itself in distress due to recklessness and greed," said President Barack Obama. "It's hard to understand how derivative traders warranted any bonus. How do they justify this?" he asked.

In the last six months, AIG has received substantial sums of bailout money from the government, said Obama, adding that he's asked Treasury Secretary Tim Geithner "to pursue every single legal avenue to block these bonuses."


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"This isn't about dollars and cents, it's about our fundamental values," said Obama.

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AIG, which is now about 80% taxpayer-owned, disclosed Sunday that roughly two-thirds of that federal aid has been paid out to trading partners, such as banks and municipalities in the U.S. and abroad, to cover contracts insuring against losses.

President Obama's comments on AIG came at a rally for small business support. The U.S. Treasury said on Monday it will invest up to $15 billion in securities backed by Small Business Administration-guaranteed loans to try to stimulate movement in credit markets for small firms.

Meanwhile, Swiss banking giant, UBS ( UBS) plans to cut up to 5,000 senior and management jobs in the next few weeks in order to weather the hard times, according to a report in Swiss weekly SonntagsZeitung.

On a brighter note, Barclays ( BCS) said it had a strong start to the year, mimicking similar comments from the Citi and JPMorgan ( JPM) chiefs last week.

"There's been a little bit of optimism, especially with some of the news coming out of Citigroup, "but there's no guarantees, and we're not out of the woods yet," says James Holtzman, financial advisor for Legend Financial.

"Some of the bad economic reports are priced in, but we've been surprised -- every time it's started to rally, something of concern has come up."

Moreover, the market can't price in what it doesn't know, or what it can't anticipate, he says. And considering the uncertainty out there, "it's hard to believe that in the last four days, everything is better, and we're ready to move forward," says Holtzman.

Thus, caution is in order, he says. "You can't just plow into it or jump right back in - and, of course, it's hard when you talk to investors who've lost 60%. That's a difficult thing."

In other banking news, Citigroup said it has nominated four new independent directors, which include two former bank CEOs and two financial experts, to be decided upon in April at the election at its annual meeting.

In commodities, oil reversed midday to gain $1.10 to $47.35 a barrel after falling more than $1 earlier in the day. The Organization of Petroleum Exporting Countries (OPEC) announced Sunday that it will hold its production steady despite expectations for another cut.

Oil and gas stocks BP ( BP), Chevron ( CVX), ConocoPhillips ( COP) and Exxon Mobil ( XOM) were all in (albeit slightly) positive territory.

Gold tracked $8.10 lower to $922 an ounce.

Stocks abroad were largely higher. The FTSE in London was up 2.4%, while the DAX in Frankfurt edged higher by 1.8%. In Asia, Hong Kong's Hang Seng and Japan's Nikkei ended higher by 1.8% and 3.6%, respectively.

Longer-dated Treasuries were falling. The 10-year note was losing 15.5/32 to yield 3%, and the 30-year was off by 1-18/32, yielding 3.8%. The dollar was stronger against the yen, and weaker vs. euro and pound.

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