While the market's major indexes showed modest losses, the number of stocks advancing outpaced decliners by about 2 to 1 on the New York Stock Exchange, and by about 4 to 3 on the Nasdaq Stock Market.
The tame session unfolded as oil rose on concerns that the threat of new sanctions against Iran over its nuclear program could escalate tensions in the Middle East. Light, sweet crude rose $2.16 to settle at $131.04 a barrel on the New York Mercantile Exchange.
The rise in oil offset initial market enthusiasm after Bank of America Corp. posted results that beat expectations, raising hope the credit crisis might be easing for the nation's biggest retail banks. The second-largest U.S. bank by assets reported that higher investment banking and record revenue helped drive earnings during the second quarter.
With Bank of America's results, four of the nation's five biggest banks have now reported better-than-expected earnings, and that's raising hopes that the financial sector is starting to recover from the year-old credit crisis.
Still, "with crude trading up near $130, and a big advance last week, some investors are taking chips off the table," said Jim Herrick, manager of equity trading at Baird & Co. "We're going to be in a tight trading range this week based on earnings and oil prices. I expect more of the same."
The market was also uneasy about drug makers Merck & Co. and Schering-Plough Corp. Both pharmaceutical companies fell after a new study showed their cholesterol drug Vytorin did not meet its main goals.
The Dow Jones industrial average fell 29.23, or 0.25 percent, to 11,467.34 after moving in and out of positive territory.
Broader indexes showed more modest declines. The Standard & Poor's 500 index slipped 0.68, or 0.05 percent, to 1,260.00; and the Nasdaq composite index dropped 3.25, or 0.14 percent, to 2,279.53.
The moves follow a strong week for the markets. The Dow last week rose 3.57 percent, while the S&P rose 1.71 percent and the Nasdaq increased 1.95 percent.
Bond prices rose Monday as the major stock indexes declined. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 4.04 percent from 4.09 percent late Friday.
The dollar was mixed against other major currencies, while gold prices rose.
Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, said the market is still feeling somewhat upbeat about how earnings are shaping up so far this quarter. And that's helped to maintain some of last week's market gains, despite the pullback on Monday.
"We're having some more good news from the financials - it wasn't as bad as feared," he said. "And we've also got some buyout deals."
Some 158 members of the Standard & Poor's 500 index and 10 of the 30 Dow industrials are slated to post results this week. One of the biggest Monday was Bank of America, which reported that increased bad debt due to the housing slump pushed profits down 41 percent. However, it still surpassed expectations due to a solid performance in its business not tied to real estate. The stock rose $1.07, or 3.9 percent, to $28.56.
But another Dow component weighing in after the closing bell could rattle investor sentiment. American Express Co.'s second-quarter profit tumbled 38 percent - results that came in well short of expectations - as consumer spending slowed and credit indicators deteriorated beyond the company's expectations. The stock fell $1.29, or 3.1 percent, to $40.90 on the day and declined more than 10 percent in after-hours electronic trading.
Investors were somewhat optimistic during Monday's session that mergers and acquisitions, which have been sluggish since the credit crisis began last year, might be reviving. Swiss drug maker Roche Holding announced plans to acquire the stake in Genentech Inc. it doesn't already own for $43.7 billion, making it the seventh-largest pharmaceuticals company in the U.S.
Shares of Genentech were among the best performers during the session, rising $12.06, or 14.7 percent, to $93.88.
Yahoo Inc. fell 78 cents, or 3.5 percent, to $21.67 after the Internet portal staved off an attempt by activist shareholder Carl Icahn to take control and sell it. Icahn, who has argued in favor of selling Yahoo to Microsoft Corp., will become a Yahoo director along with two of his nominees.
In economic news, Treasury Secretary Henry Paulson sought to reassure the public Sunday that the banking system is sound, while also preparing people for more troubled times ahead. "I think it's going to be months that we're working our way through this period - clearly months," he said.
And that was confirmed by more economic data Monday. The Conference Board said the economy contracted in June as factories cut workers' hours and stocks tumbled. The research group's index of leading economic indicators, a gauge of future economic activity, fell 0.1 percent, in line with estimates by Wall Street economists surveyed by Thomson Financial/IFR. It also revised its May figure to show a decline instead of slight growth.
The Russell 2000 index of smaller companies rose 4.55, or 0.66 percent, to 697.63.
Consolidated volume on the New York Stock Exchange came to 4.50 billion shares, compared with 5.49 billion shares traded Friday.
Overseas, markets in Japan were closed for a holiday. Britain's FTSE 100 rose 0.52 percent, Germany's DAX index added 0.66 percent, and France's CAC-40 rose 0.65 percent.
