NEW YORK – Wall Street retreated from a two-year high on Monday, weighed down by financial stocks and a stronger dollar.
The broad S&P 500 has risen five straight weeks, supported by the Federal Reserve's plan to buy $600 billion of Treasuries to lower interest rates and reinvigorate a sluggish economy.
With those gains, traders said most S&P sectors were susceptible to a decline.
Financial stocks (.GSPF), the top gainers in recent sessions, fell 0.8 percent following a 6.9 percent weekly advance.
"We just had gains that is probably a year's worth in just 2-1/2 months. People are feeling a little extended, and there is psychological and technical resistance out there," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.
Declines in bank shares could go beyond profit-taking from last week's gains. The Fed's pledge to keep interest rates near record lows was viewed as hurting bank profits.
"Negative interest rates are not healthy for financial stocks, and banks still have a lot of bad debt on their books," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville.
Bearing the brunt of the declines were insurers (.KIX) , which fell 1.2 percent and the KBW Banks index (.BKX), which slipped 0.6 percent.
The Dow Jones industrial average (.DJI) was down 37.24 points, or 0.33 percent, at 11,406.84. The Standard & Poor's 500 Index (.SPX) was down 2.60 points, or 0.21 percent, at 1,223.25. The Nasdaq Composite Index (.IXIC) was up 1.07 points, or 0.04 percent, at 2,580.05.
The dollar (.DXY) rose 0.7 percent against major currencies on renewed worries about budget problems in Ireland and other debt-weakened euro zone members.
Since the euro zone financial crisis, a popular trade has been to sell the S&P 500 when the euro falls against the dollar, but that correlation has frayed of late. The 22-day rolling correlation between the euro and the S&P E-mini futures was 0.52, compared with 0.89 just two weeks ago.
"Will today's decline develop into something on the down side? Probably not, but we've got to keep watching where the dollar is headed. No matter how you slice it, the dollar is critical to this rally, especially post-Fed," Pado said.
Analysts said the G20 meeting, which will be hosted in South Korea on Thursday and Friday, will be the next catalyst in moving the dollar.
The S&P 500 faces strong resistance around 1,228, which would retrace 61.8 percent of the decline between its historic highs in 2007 and the 12-year low in March 2009. This is one of the Fibonacci retracements that chartists widely follow and many times coincide with buying or selling markers.
In April, a first attempt to breach that level failed and preceded a decline that took the index to its 2010 low in early July.
Gains in technology stocks, including Apple Inc (AAPL.O), up 0.5 percent to $318.80, kept the Nasdaq near break-even.
Material stocks outperformed the broader market, and gold miners rose as the precious metal powered to an all-time high above $1,400 an ounce. For details, see .
Shares of coal producers rose on strong global demand for steel-making coal and renewed talk of mergers.
Shares of Alpha Natural Resources (ANR.N) rallied 8.6 percent to $48.26, while Arch Coal (ACI.N) gained 4.6 percent to $29.61. Consol Energy (CNX.N) rose 3.6 percent to $40.71.
Volume was light, with about 7.07 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below the year-to-date daily average of 8.73 billion.
About 16 stocks fell for every 13 that rose on the New York Stock Exchange, while on the Nasdaq, about 13 stocks fell for every 12 that advanced.