The S&P 500 and Nasdaq ended slightly lower on Monday and the Dow was flat, reversing earlier gains, after comments by Federal Reserve Chairman Ben Bernanke sparked jitters about the economic recovery.

Financial and technology shares were among the biggest drags on the market. The S&P Financial Index <.GSPF> lost 1.6 percent while the KBW Bank Index <.BKX> shed 2.1 percent.

Speaking at the Economic Club of Washington, Bernanke said inflation could remain subdued, but the U.S. unemployment rate could remain elevated for some time.

Initially the Fed chief's remarks lifted stocks and sent the dollar lower, but later some investors pared positions. Bernanke said the U.S. economy faces formidable headwinds, including a weak labor market and tight credit conditions that have persisted despite the Fed's efforts to support the economy.

Obviously there was an initial boost, but as people looked more into it, they realized ... we do face 'formidable headwinds,' said Tim Speiss, partner at Eisner LLC in New York.

The Dow Jones industrial average <.DJI> ended up 1.21 points, or 0.01 percent, at 10,390.11. The Standard & Poor's 500 Index <.SPX> lost 2.73 points, or 0.25 percent, at 1,103.25. The Nasdaq Composite Index <.IXIC> fell 4.74 points, or 0.22 percent, at 2,189.61.

Investors had been looking for a clue as to how the Fed might unwind its economic stimulus efforts after a report on Friday showed employers cut far fewer jobs than expected in November were reassured.

Bank of America closed down 2.4 percent at $15.89 and JPMorgan Chase fell 1.2 percent to $41.25.

Citigroup Inc shares ended down 2.2 percent to $4.03 on news that it is in a disagreement with the U.S. government over how much money the bank should raise to exit the Troubled Asset Relief Program. Negotiations between the bank and the government may not be finished for weeks or months, according to people briefed on the matter.

(In financials) there are still a lot of questions as to how TARP recipient banks are going to pay back, the issue with compensation, lots of things to point to, said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

On the Nasdaq, Microsoft Corp fell 0.6 percent to $29.79 and Intel Corp closed down 0.4 percent at $20.37.

(Reporting by Angela Moon, Editing by Kenneth Barry)