Stocks mixed on banks and oil
Markets are hit by ongoing woes for the bank and auto sectors. Rising oil prices hurt sentiment, but boost energy stocks, enabling the Dow and S&P 500 to erase losses.
NEW YORK (CNNMoney.com) -- The Nasdaq tumbled and the broader market was mixed Monday afternoon as investors eyed ongoing problems in the financial and automaker sectors and a rise in oil prices.
After the close, UPS (UPS, Fortune 500) cut its second-quarter earnings forecast, due to slower economic growth and higher fuel costs. Shares slumped more than 4% in after-hours trading.
The Dow Jones industrial average (INDU) and the broader Standard & Poor's 500 (SPX) index both ended near the unchanged line, while the tech-heavy Nasdaq composite (COMP) lost 0.8%.
A stronger dollar and two major deal announcements helped stocks rise in the early going. But the tone soon turned negative as concerns about bank and automaker firms resurfaced, giving investors a reason to hesitate.
Rising oil prices had a mixed impact, adding to worries about inflation, but also lifting oil services stocks such as Exxon Mobil, which kept the Dow from posting the same kind of losses as the Nasdaq.
Stocks are also struggling in the wake of last week's big slump, when worries about the credit market crisis and inflation sent the Dow to a three-month low.
"Oil is up and it seems like the market has a hard time moving forward whenever that happens," said Kenny Landgraf, principal at Kenjol Capital Management.
Landgraf said investors were also reacting to the renewed problems with the financial sector and pending downgrades of Ford and GM debt.
Additionally, "people are kind of on hold ahead of the Fed," he said.
The central bank's two-day policy meeting gets underway Tuesday, with a decision expected Wednesday afternoon. Ben Bernanke and the other bankers are expected to hold interest rates steady, while the statement is expected to maintain that the Fed is ready to act on rising inflationary pressures.
In addition, Tuesday also brings the June reading on consumer confidence from the Conference Board. The index is expected to have dipped to 56.0 from 57.2 in May.
Bank and auto stocks slide: Citigroup (C, Fortune 500) is about halfway through previously announced job cuts in its investment banking unit, according to published reports, with the bulk of those cuts expected this week.
Citigroup, which has seen big losses amid the credit market crisis, said earlier this year that it will cut 10% of the 65,000 employees in its investment banking unit. (Full story).
That news pressured other financial stocks, including JP Morgan Chase (JPM, Fortune 500), Bank of America (BAC, Fortune 500) and Merrill Lynch (MER, Fortune 500).
The auto sector remained under pressure, with GM (GM, Fortune 500) stock losing 6.4%, after nearing a 33-year low, according to Dow Jones, on continued worries about the industry's cash position.
Separately, GM said Monday that it will offer 0% financing for 72 months on certain cars and trucks, as a means of unloading select 2008 vehicles. The company also announced prices increases on some 2009 models. (Full story).
Auto stocks were hit hard Friday, after Ford said it is delaying the launch of its redesigned pickup truck and warned that its 2008 loss will be bigger than its 2007 loss.
Following that news, S&P said it will probably cut GM, Ford Motor and Chrysler's debt ratings and the debt ratings of the companies' finance units. Also, Moody's said Ford and Chrysler are in danger of being downgraded - a warning it already gave about GM earlier this year.
Other movers: The rally in oil prices boosted energy stocks including Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500).
But it also dragged on the stocks of companies that are especially fuel dependent, such as airlines. The Amex Airline index lost 7%.
In merger news, Republic Services (RSG), a disposal company, said it will buy rival Allied Waste Industries (AW, Fortune 500) in a $6.1 billion stock deal. (Full story)
Farm-products company Bunge (BG) is buying Corn Products (CPO) for $4.8 billion in stock and the assumption of debt. (Full story)
Market breadth was negative. On the New York Stock Exchange, losers beat winners two to one on volume of 1.08 billion shares. On the Nasdaq, losers beat winners by over two to one on volume of 1.93 billion shares.
Oil prices rise: U.S. light crude oil for August delivery rose $1.38 to settle at $136.74 a barrel on the New York Mercantile Exchange. Prices were volatile as investors weighed a possible disruption in Nigerian supply with news that Saudi Arabia will boost daily output to 9.7 million barrels from the current 9 million barrels. (Full story).
Other markets: In currency trading, the dollar gained versus the euro and the yen.
In the bond market, Treasury prices rose modestly, lowering the yield on the benchmark 10-year note to 4.16% from 4.17% late Friday. Bond prices and yields move in opposite directions.
COMEX gold for August delivery fell $16.50 to settle at $887.20 an ounce.
The national average price for a gallon of regular unleaded gas fell to $4.072 from $4.073 the previous day, according to AAA. (Full story). 
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