NEW YORK - The Dow and the S&P 500 ended effectively unchanged on Monday in thin trade as renewed concerns about the outlook for financial shares offset gains in energy stocks and news of a $4.4 billion takeover in the agricultural sector.
The market may be under more pressure on Tuesday, however, after package delivery company United Parcel Service lowered its second-quarter earnings outlook after the bell, citing slow economic growth and high fuel costs. This follows a similar warning from rival FedEx last week. UPS shares slid 4.2 percent in extended trade, falling to $63.50 from a close at $66.26 on the New York Stock Exchange.
Consumer discretionary stocks took a beating during Monday's session after Goldman Sachs recommended that clients "sell" the sector on economic concerns. Shares of coffee chain Starbucks, online retailer eBay and iPod maker Apple fell, pushing the Nasdaq lower.
Financial stocks weighed on the market after Goldman Sachs backtracked on its May recommendation, telling clients to sell the sector as credit conditions deteriorate.
Also hurting financials and pushing the Financial Select Sector SPDR fund down to a 5-year low were comments by Banc of America Securities that it expects more write-downs at investment banks Merrill Lynch and UBS AG.
Volume was thin, however, with traders hesitant to place any big bets before the Federal Reserve's next interest-rate decision, due on Wednesday, when it is expected to leave its benchmark interest rate unchanged.
But gains in shares of energy companies, including Exxon Mobil, lent some support, after Saudi Arabia's output boost was seen as too little to limit soaring oil prices.
Also keeping losses in check was news that fertilizer producer Bunge Ltd agreed to buy Corn Products International Inc.
"There's continued concerns about further credit deterioration. Goldman said things are worse than we thought-- and in general, there doesn't appear to be a light at the end of the tunnel yet," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.
The Dow Jones industrial average dipped just 0.33 of a point to finish essentially flat at 11,842.36. The Standard & Poor's 500 Index edged up just 0.07 of a point, or 0.01 percent, to close at 1,318.00. The Nasdaq Composite Index, meanwhile, fell 20.35 points, or 0.85 percent, to close at 2,385.74.
Shares of Merrill Lynch fell 3.9 percent to $34.54, after Banc of America Securities said it expects the investment bank to write down $3.5 billion in the second quarter.
Insurer American International Group's shares fell 5.6 percent, making it one of the top drags on the Dow after Barron's newspaper said the stock "will likely be dead money for some time to come," citing the potential for more accounting woes ahead.
AIG shares declined to $30.30 on the New York Stock Exchange, while Bank of America's stock slid 4.5 percent to $25.88, and JPMorgan shares fell 2.6 percent to $36.87.
Corn Products shares jumped 18.3 percent to $50.75 on the NYSE, while Bunge shares sank 9.4 percent to $110.70.
Among energy shares, Exxon shares rose 3.3 percent to $87.70 while Chevron rose 2.5 percent to $99.06.
Among stocks sensitive to consumer discretionary spending, Starbucks fell 5.4 percent to $16.30, eBay shed 1.6 percent to $27.73, and Apple slid 1.2 percent to $173.16, all in Nasdaq trading.
Trading was light on the New York Stock Exchange, with about 1.09 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.93billion shares traded, also below last year's daily average of 2.17 billion.
Declining stocks outnumbered advancing ones by a ratio of about 2 to 1 on the NYSE and about 5 to 2 on the Nasdaq.