NEW YORK (Reuters) - Stocks were little changed on Monday as a late rebound in financial stocks offset nagging worries the Chinese government may tighten credit, a move that could slow growth in the global economy.
Banking stocks reversed course late in the session after Senate Banking Committee Chairman Christopher Dodd released a proposed financial regulation overhaul bill that investors said did not offer any surprises for the sector.
"The Dodd announcement this afternoon may have brought in some negative sentiment and uncertainty waiting to see what he was going to say," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
The KBW Banks index .BKX added 0.2 percent after falling as much as 1.2 percent earlier.
Shanghai's key stock index fell to its lowest close in five weeks on Monday on expectations China's central bank would step up monetary tightening measures to stem inflation that is rising faster than expected.
Major economic sectors driven by worldwide growth were hit hard on Monday, including energy, which fell 1 percent as crude oil declined, and chipmakers .SOXX, which were down 1.4 percent on brokerage downgrades.
The Dow Jones industrial average .DJI gained 17.46 points, or 0.16 percent, to 10,642.15. The Standard & Poor's 500 Index .SPX added 0.52 point, or 0.05 percent, to 1,150.51. The Nasdaq Composite Index .IXIC slipped 5.45 points, or 0.23 percent, to 2,362.21.
On Tuesday the interest-rate setting committee of the Federal Reserve holds a one-day meeting in which the central bank is widely expected to repeat its promise to keep borrowing costs exceptionally low for "an extended period."
The S&P Energy index .GSPE was the worst performer among S&P sectors as crude oil declined 1.7 percent to $79.80 a barrel on a stronger dollar.
Also weighing on energy stocks was Consol Energy Inc (CNX.N), which tumbled 10.1 percent to $48.85 after the Pittsburgh-based company agreed to buy the Appalachian natural gas properties of Dominion Resources Inc (D.N) for $3.48 billion in cash.
Semiconductors were a drag on the Nasdaq as analysts lowered their ratings on several chip stocks, including downgrades of Lam Research Corp (LRCX.O) and KLA-Tencor Corp (KLAC.O) by Oppenheimer and a Barclays cut of Atheros Communications Inc ATHR.O. The PHLX Semiconductor index shed 1.4 percent.
Lam Research dropped 4.6 percent to $32.68, KLA-Tencor fell 4.6 percent to $28.09 and Atheros declined 4.1 percent to $35.69.
Wal-Mart Stores Inc (WMT.N) was the top boost to the Dow, up 2.8 percent to $55.42 after Citigroup upgraded the world's biggest retailer.
Google Inc (GOOG.O) shares dropped 2.8 percent to $563.18 after the world's biggest search engine said it remained in talks with the Chinese government about censorship of its Chinese-language search portal despite signs the company could soon shut the site.
About 7.24 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, the third slowest day of 2010 and below last year's estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 4 to 3. On the Nasdaq, the decliners outnumbered advancers by a ratio of about 3 to 2.
Editing by Kenneth Barry