Stocks finished flat on Monday as investors held back before congressional testimony by Fed Chairman Ben Bernanke, while scattered buying lifted shares of health insurers and banks.
President Barack Obama revised plans for an overhaul of healthcare. The Morgan Stanley healthcare payor index <.HMO> rose 1.7 percent, but investors said financial shares benefited from the focus shifting away from reform in that sector.
The KBW bank index <.BKX> rose 1.9 percent, but energy shares weighed on the broader market.
Investors are hoping Fed Chairman Ben Bernanke clarifies the Fed's thinking behind last week's surprising hike in the discount rate that begins the removal of the extraordinary liquidity that has propped up markets. Investors treaded carefully, leading to the lowest daily volume so far this year.
People are still trying to figure out what the intentions of Bernanke are, moving forward, said Dennis Cajigas, senior market strategist at Lind-Waldock, a retail brokerage firm in Chicago.
Was the increase in the discount rate simply technical rebalancing or normalization? Or is it going to be something that's indicative of monetary policy down the road?, he added.
The Dow Jones industrial average <.DJI> dropped 18.97 points, or 0.18 percent, to end at 10,383.38. The Standard & Poor's 500 Index <.SPX> shed 1.16 points, or 0.10 percent, to 1,108.01. The Nasdaq Composite Index <.IXIC> fell 1.84 points, or 0.08 percent, to 2,242.03.
Bernanke is scheduled to testify on monetary policy and the economy before House and Senate committees on Wednesday and Thursday.
Energy shares weighed on the S&P 500, but their impact was mitigated by a jump in banks as investors bet that the White House's bid on Monday to resuscitate the stalled healthcare overhaul would take some of the intense regulatory scrutiny off the banks.
The S&P energy index <.GSPE> dropped 1.3 percent, while shares of Chevron Corp
But among banks, JPMorgan Chase
The Democrats are going to spend so much political capital trying to get healthcare through that they might not necessarily have that capital to get any major financial reform through, said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets in Baltimore.
Slow trading volume also made investors reluctant to push stocks higher, but a spurt of takeover news involving energy and the pharmaceutical sectors pointed to optimism about share valuations.
In takeover news, oilfield services company Schlumberger Ltd
Schlumberger shares fell 3.7 percent to $61.57 and led decliners in the S&P energy index, but Smith International rose 8.8 percent to $41.03.
Among health insurers, WellPoint Inc
Analysts said the spur for health insurers was a late Friday announcement of a higher-than-expected payment rate for 2011 for privately run Medicare plans.
(Additional reporting by Rodrigo Campos; Editing by Jan Paschal)