Wall Street's rally hits a wall
Stocks fall as investors take a step back from the two-month rally. Dow posts its biggest selloff in 3 weeks.
NEW YORK (CNNMoney.com) -- Stocks stumbled Monday as investors took a step back after propelling the major stock gauges by more than 30% each in just two months.
Treasury prices rallied, lowering the corresponding yields, as investors pulled money out of stocks and put it into the safer-haven bonds.
The Dow Jones industrial average (INDU) lost 156 points, or 1.8%. It was the Dow's biggest one-day selloff in three weeks.
The S&P 500 (SPX) index lost 20 points, or 2.1%. Both the Dow and S&P 500 ended the previous session at four-month highs.
The Nasdaq composite (COMP) lost 8 points or 0.5%.
Stocks have been rallying since hitting multi-year lows in early March. The Dow and S&P 500 have risen for eight of the past nine weeks; the Nasdaq has risen for 9 in a row. In that time the Dow gained 31% and the S&P 500 and Nasdaq gained 37%.
Gains have been predicated on bets that the financial sector and economy are close to stabilizing. But with little economic news to focus on Monday, investors opted to back off.
After such a big run, stocks are probably going to be in a consolidation phase for the next couple of months, said Dan Genter, president and CEO at RNC Genter Capital Management.
"We're starting to see visibility of earnings going into the fourth quarter of the year and that's helped the market get back to more reasonable valuations," Genter said.
"But we're probably going to be lacking for a significant amount of good news to push us higher in the short term," he said.
Federal Reserve Chairman Ben Bernanke is speaking Monday night at the Federal Reserve Bank of Atlanta's Financial Markets Conference on the results of the stress tests. His comments may influence markets in the early going Tuesday.
The March trade gap from the Census Bureau is due Tuesday morning, along with the National Association of Realtors' report on first-quarter median home prices.
Financials: Bank shares slipped, with the KBW Bank (BKX) sector index losing 7.1%.
Last week, the government revealed that 10 of the 19 banks that had been part of the stress tests would need to raise a collective $75 billion to be strong enough to withstand a potentially deeper recession.
Wells Fargo (WFC, Fortune 500) and Morgan Stanley (MS, Fortune 500), two of the 10 banks needing capital, sold billions in stock just one day after the Thursday stress test announcements. Bank of America also registered Friday to sell 1.25 billion shares, which the company said will yield around $11 billion.
On Monday, U.S. Bancorp (USB, Fortune 500), Capital One Financial (COF, Fortune 500), BB&T (BBT, Fortune 500) and KeyCorp (KEY, Fortune 500) all announced plans to issue stock, with the intention of paying back the money their received under the government's bank bailout plan.
KeyCorp was one of the 10 banks that was told to raise more capital as a result of the stress tests. The other 3 were not.
In other banking news, troubled insurer American International Group (AIG, Fortune 500) is selling its Japanese headquarters to Nippon Life Insurance for $1.2 billion, in its latest undertaking to pay back a massive government loan. AIG shares fell 5.5%.
Company news: General Motors (GM, Fortune 500) shares slumped 10% after CEO Fritz Henderson repeated earlier comments that a bankruptcy filing is "probable." The government has given the company until the end of the month to reach deals with its creditors, labor union and dealerships to cut costs. If it fails to do so, GM will be placed into Chapter 11 bankruptcy protection, like Chrysler.
Ford Motor (F, Fortune 500), considered to be the healthiest of the big American automakers, has not taken government money and is not facing a bankruptcy filing.
Market breadth was negative. On the New York Stock Exchange, losers beat winners seven to three on volume of 1.49 billion shares. On the Nasdaq, decliners topped advancers four to three on volume of 2.53 billion shares.
Washington: In other news, President Obama said Monday that he has secured the commitment of a number of industry groups to cut health care costs by $2 trillion over the next decade.
And the administration's top antitrust official said Obama will take a more aggressive approach to cracking down on monopolies than did his predecessor.
Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.17% from 3.28% Friday. Treasury prices and yields move in opposite directions.
Lending rates continued to fall. The three-month Libor rate fell to an all-time low of 0.92% from 0.94% Friday, according to Bloomberg.com. The overnight Libor rate held steady at 0.23%. Libor is a bank lending rate.
Other markets: In global trading, most Asian markets ended lower. European markets were lower in afternoon trading.
In currency trading, the dollar rose versus the euro and fell against the yen.
U.S. light crude oil for June delivery fell 13 cents to settle at $58.50 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery fell $1.40 to settle at $913.50 an ounce. 
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