Stocks cut losses
Wall Street pares some of its declines as investors gear up for major banks' plans for raising capital.
NEW YORK (CNNMoney.com) -- Stocks cut losses Monday, ending mixed, as investors scooped up bank and consumer shares and kept an eye on Treasury bond yields, the dollar and commodity prices.
After the close, the Supreme Court granted a stay in the sale of Chrysler's assets to Italian automaker Fiat, at the behest of a group of shareholders. The move delays Chrysler's exit from bankruptcy, which had been expected to occur as soon as Monday.
The Dow Jones industrial average (INDU) ended just above unchanged and the S&P 500 (SPX) index ended just below unchanged. The Nasdaq composite (COMP) lost 7 points or 0.4%.
All three major indexes had slumped through the session, before turning higher near the close and ultimately ending mixed.
The late-session turnaround was positive, but deceptive, in that the market breadth numbers remained negative, said Donald Selkin, chief market strategist at National Securities. He was referring to the fact that more shares fell than gained, on both the Nasdaq and New York Stock Exchange.
He said that going forward, it's going to be difficult for the major indexes to push much higher.
"We saw some resiliency today, but I think the market is going to be laboring under the perception that the Federal Reserve is going to be forced to raise rates," Selkin said.
That's partly because Treasury yields have been rising, with the 2-year note yield now more than a full percentage point above the fed funds rate, which has been near zero since December.
Meanwhile, the 10-year note is edging closer to 4%, a level not seen since October. The spike has raised worries about the recovery hitting roadblocks before it's barely begun.
Some optimism about the bank sector Monday helped to counter worries about inflation, the dollar and the spike in Treasury bond yields, said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.
"The banks are up because the rumor is that there are going to be nine banks that they allow to pay back TARP funds," Rovelli said.
The government will let the banks know this week, perhaps as soon as Tuesday morning, which ones they deem to be sufficiently capitalized to pay back the TARP funds received last fall.
Monday is the deadline for plans to be submitted by banks that need to raise additional cash as a result of the government's stress tests.
Stalling after the rally: Stocks were weaker through most of Monday's session as investors showed caution after a rally that has propelled the Dow off of 12-year lows hit in early March. The Dow has risen in 11 of the last 13 weeks, climbing 32.2% as of Friday's close. That's the blue-chip average's best 13-week run in 26 years.
The other major indexes have also rocketed since March 9. Since hitting a more than 12-year low, the S&P has gained 39% as of Friday's close. The Nasdaq has rallied 45.8% as of Friday's close, since bouncing off of a 6-year low.
Pacing a typical post-rally retreat is the start of a shift in investor perception, said Jeffrey Kleintop, chief market strategist at LPL Financial.
He said the spate of not-as-bad economic news, punctuated by last Friday's milder than expected job-loss report, has raised questions about whether the economy is healing faster than expected. If so, how will all the stimulus spending impact growth, and how will the government respond?
"The focus has switched to 'yes, things are turning around, but maybe more rapidly than expected, and what does that mean for inflation?'" he said.
Financials: Banks were in focus Monday. The 10 banks that were required to raise a collective $75 billion as a result of the government "stress tests" have to submit detailed plans by Monday.
Bank of America (BAC, Fortune 500), Morgan Stanley (MS, Fortune 500) and PNC Financial Services (PNC, Fortune 500) are among the companies that have already met or exceeded requirements.
In addition, the government is expected to announce which banks can pay back the TARP funds.
Most major bank stocks were higher, boosting the KBW Bank sector index by 1.3%.
Apple: On Monday afternoon, the tech behemoth introduced a faster version of its iPhone, lowered the price on its existing phone and offered details on its revamped operating system. Apple (AAPL, Fortune 500) shares ended modestly lower.
Company news: Fidelity and private-equity firm KKR are teaming up to give customers of the mutual fund company access to initial public offerings of KKR companies.
The global airline industry is likely to lose $9 billion this year due to weaker demand and the impact of the recession, according to trade group the International Air Transport Association.
Among stock movers, consumer shares advanced, including Dow components' Home Depot (HD, Fortune 500) and Walt Disney (DIS, Fortune 500).
McDonald's shares dipped after the company reported May sales at stores open a year or more rose 5.1%, versus a rise of 6.9% in April.
Market breadth was negative. On the New York Stock Exchange, losers beat winners three to two on volume of 1.08 billion shares. On the Nasdaq, decliners topped winners eight to five on volume of just under 2 billion shares.
Other markets: In global trading, Asian markets ended mixed and European markets ended lower.
In currency trading, the dollar gained versus the euro and fell against the yen.
U.S. light crude oil for July delivery fell 35 cents to settle at $68.09 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell $10.10 to settle at $952.50 an ounce. 
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