U.S. stocks fell on Monday as a fraud case against Goldman Sachs weighed on the market for a second day, overshadowing positive Citigroup earnings and upbeat economic data.
After seesawing between losses and gains for most of the morning, Wall Street was lower by the afternoon with technology and materials shares among the biggest losers.
The S&P financial index <.GSPF> fell 0.8 percent, extending Friday's selloff, as Goldman Sachs Group Inc was facing rising regulatory pressure amid allegations the bank duped clients.
Goldman, which reports results on Tuesday, was down 1.2 percent at $158.77. Investors fretted over the possibility of increased regulation and what it would mean for banks' profits.
It's seen as detracting from their businesses or maybe restricting their business in some way because these companies might have to be more risk averse due to potential regulation, said Nick Kalivas, vice president of financial research and senior equity index analyst at MF Global in Chicago.
It's a good reason to book some profits and get out of the way and see how it plays out.
The Dow Jones industrial average <.DJI> edged up 1.29 points, or 0.01 percent, at 11,019.95. The Standard & Poor's 500 Index <.SPX> slipped 3.88 points, or 0.33 percent, to 1,188.25. The Nasdaq Composite Index <.IXIC> dropped 20.49 points, or 0.83 percent, to 2,460.77.
Providing support, Citigroup jumped 3.5 percent to $4.72 after the bank swung to a quarterly profit, turning in its best result since 2007.
The Dow fared better than the other two indexes, trading near break-even as it was supported by gains in a handful of companies reporting results this week. International Business Machines , which reports after the close, was up 0.8 percent to $131.64.
On the downside, materials shares slipped alongside commodity prices and as China took further steps to rein in a surging real estate market.
To the extent that they cooled down their economy, in particular the property sector, you've got to believe construction cools down and commodity prices cool down, said Rick Campagna, portfolio manager at 300 North Capital LLC in Pasadena, California.
The PHLX semiconductor index <.SOXX> was down 2.4 percent.
On the Nasdaq, Palm Inc skidded 14.5 percent at $4.78 after the resignation of the chief of its webOS phone software, while Morgan Keegan downgraded the maker of the Pre handset.
Sprint Nextel Corp said RadioShack is phasing out Palm's Pre and Pixi phones for two newer Sprint devices.
In economic news, a gauge of the U.S. economy's prospects rose more strongly than expected to a record high in March, pointing to a steady recovery.
(Additional reporting by Chuck Mikolajczak; Editing by Kenneth Barry)