| NEW YORK
NEW YORK The S&P 500 ended flat on Monday after recent sharp losses, though worries about the European debt crisis and weaker U.S. data kept investors wary of equities.
Signs of economic weakness around the globe and Europe's intensifying debt crisis have rattled investors, who have been dumping riskier investments like commodities and equities for the safety of government bonds.
The flat session follows Friday's slide of more than 2 percent that erased the Dow industrial average's gains for the year. The S&P 500 is now up just 1.6 percent for 2012 and is approaching correction territory, which would be a decline of at least 10 percent from its most recent high in April.
"I think we dropped a little bit too far, too fast, and the reaction may have been a little overdone regarding Friday's employment report," said Fred Dickson, chief market strategist at D.A. Davidson & Co., in Lake Oswego, Oregon.
In the near term, "our feeling is we'll drift slowly lower until we get some sort of positive news out of Europe."
Friday's U.S. jobs report was much weaker than expected.
On Monday, U.S. data showed orders for manufactured goods dropped 0.6 percent in April, its third decline in four months and confounding expectations calling for a 0.2 percent gain.
In a potential boost to markets looking for measures to end the debt crisis, German Chancellor Angela Merkel is pressing for much more ambitious measures, including a central authority to manage euro-area finances and major new powers for the European Commission, European Parliament and European Court of Justice.
Spanish Prime Minister Mariano Rajoy is advocating a direct European rescue for the country's banks with moral support from the European Commission, but Germany appeared cool to such a move for the euro zone's fourth biggest member.
The S&P financial sector .GSPF, seen as most exposed to Europe's debt crisis, was down 1 percent. The S&P's economically sensitive industrial sector .GSPI was also down 1 percent, leading the day's declines.
The Nasdaq ended higher, helped by gains in Amazon (AMZN.O), up 3.1 percent at $214.57.
The Dow Jones industrial average .DJI slipped 17.11 points, or 0.14 percent, to 12,101.46 at the close. The Standard & Poor's 500 Index .SPX inched up just 0.14 of a point, or 0.01 percent, to 1,278.18. The Nasdaq Composite Index .IXIC rose 12.53 points, or 0.46 percent, to close at 2,760.01.
The market's technical picture remains bearish, with the S&P 500 on Friday breaking below its 200-day moving average. In the near term, however, the benchmark S&P 500 is in an area that could attract buyers.
"Given the magnitude of the decline, you are in an area where oversold conditions are approaching," said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.
U.S. banking stocks are sliding into a bear market as Europe's debt crisis pressures the sector. The KBW Bank index .BKX, which measures the performance of 24 U.S. banks, is down about 18 percent from its intraday high in March. On Monday, the index was down 2.2 percent at $41.
Morgan Stanley (MS.N) has come under pressure as bond markets treat the bank as a junk-rated company, and the higher borrowing costs could already be putting it at a disadvantage even before an expected ratings downgrade. On Monday, Morgan Stanley's stock fell 2.9 percent to $12.36.
Shares of social networking company Facebook Inc (FB.O) kept struggling to find solid footing, hitting a new low of $26.44 since its debut slightly more than two weeks ago. The stock was down 3 percent at $26.90.
Among the day's decliners, shares of Delta Air Lines (DAL.N) fell 11.6 percent to $10.18. It reported results for May. Grupo Aeromexico (AEROMEX.MX) said Delta bought a 4 percent stake in the airline for $65 million.
Volume was slightly more than average. About 7.15 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, compared with the year-to-date daily average of 6.85 billion shares.
Decliners beat advancers on the NYSE by about 17 to 13. On the Nasdaq, decliners barely elbowed out advancers with 1,266 shares falling and 1,243 stocks rising.
(Reporting by Caroline Valetkevitch; Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)