Stocks can't find direction

NEW YORK (CNNMoney.com) -- Stocks struggled for direction Monday as investors welcomed falling oil prices, a strong employment report and some company deals but showed reluctance after last week's rally and the upcoming start of the earnings reporting period.

The Dow Jones industrial average (up 8.94 to 12,569.14, Charts) added a few points, ending higher for the seventh session in a row, while the broader S&P 500 (up 0.85 to 1,444.61, Charts) index ended little changed. The Nasdaq (Charts) composite ended lower, breaking a six-session winning streak.

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Stocks gained Thursday at the end of a strong week on Wall Street in which the three major gauges all added more than 1.5 percent.

Stock markets were closed for Good Friday, making Monday the first time investors could react to Friday's bullish March employment report.

But the reaction was pretty mild Monday, with investors having already had the long weekend to ponder the implications of the report, said John Davidson, president at PartnerRe Asset Management.

Also taking the glow off the report for stock investors: the flip side of a strong labor market and strong economy means that the Federal Reserve is less likely to cut interest rates anytime soon, according to Davidson.

Falling oil prices added to the list of positive catalysts for investors, along with Dow Chemical buyout talk and other corporate news.

But investors took a cautious approach nonetheless, ahead of the start of the quarterly earnings reporting period, which unofficially begins with Alcoa (up $0.28 to $34.87, Charts) Tuesday night and continues with Genentech (down $0.76 to $82.64, Charts) and General Electric (down $0.24 to $34.78, Charts) later in the week.

"We're going to have more volatility over the next month as the earnings come in," Davidson said. "I think the muted reaction we're seeing today might be indicative of a more 'wait and see' attitude on the part of investors in general right now before they commit."

In addition to earnings, Wednesday brings the release of the minutes from the March Federal Reserve policy meeting, which investors will scour for hints about the direction of interest rate policy. However, as Fed chair Ben Bernanke made clear in his recent congressional testimony, the outlook on the economy has worsened recently.

Friday brought the release of the Labor Department's March employment report, the biggest economic report of the month.

Employers added 180,000 jobs to their payrolls, after adding an upwardly revised 113,000 in the previous month. Economists surveyed by Briefing.com expected 135,000.

The unemployment rate, generated by a separate survey, fell to 4.4 percent in the month from 4.5 percent in the previous month. Economists thought it would rise to 4.6 percent.

Average hourly earnings, the report's inflation component, rose 0.3 percent, as expected, after climbing 0.4 percent in the previous month.

The report, taken as a whole, seemed to indicate strong growth and in-line inflation pressure, a comfortable scenario for stock investors.

Among stock movers, Dow Chemical (up $2.16 to $46.63, Charts) jumped 5 percent on talk that a group of investors is prepping a $50 billion bid for the company, in what could be the biggest leveraged buyout in history. (Full story).

Burlington Northern Santa Fe (up $5.36 to $88.08, Charts) gained 6.5 percent in unusually active New York Stock Exchange trading after Warren Buffett's Berkshire Hathaway (Charts) said it had bought a 10.9 percent stake in the company to become its largest shareholder.

That gave a boost to a variety of railroad stocks, with the sector also benefiting from a drop in oil prices.

The drop in oil prices was also a boon for truckers and airlines, which, like the railroads, are sensitive to fuel costs. The Dow Jones transportation (up $8.94 to $12,569.14, Charts) average added 1.9 percent.

Chip maker Advanced Micro Devices (up $0.49 to $13.35, Charts) warned that first-quarter revenue won't meet expectations because of lower prices and lower sales. The chip maker, which has struggled over the past year to keep up with rival Intel, also announced a restructuring plan to cut costs this year. Shares gained 3.8 percent.

Intel (up $0.52 to $20.10, Charts) rose as well.

Among other movers, biotech Nuvelo (up $1.96 to $5.68, Charts) jumped 52 percent in surprisingly active trading on rumors that partner Bayer may expand trials of Nuvelo's experimental drug clot dissolver.

Market breadth was negative. On the New York Stock Exchange, losers and winners were in rough balance on volume of 1.26 billion shares. On the Nasdaq, decliners topped advancers by 8 to 7 as 1.75 billion shares changed hands.

U.S. light crude oil for May delivery fell $2.73 to settle at $61.55 a barrel on the New York Mercantile Exchange on fund selling and relief about the developments in Iran.

COMEX gold for June delivery fell $2.50 to settle at $676.90 an ounce.

Treasury prices were little changed, with the yield on the 10-year note at 4.75 percent, just above where it stood Friday, when the market had a shortened holiday session. Bond prices and yields move in opposite directions.

In currency trading, the dollar inched higher versus the euro and held near a six-week high versus the yen, hit last week.

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