US STOCKS-Dow, S&P flat as early rally loses steam

(Updates to midday, changes byline)

* Oil's gain sours sentiment on Wall Street

* Energy stocks retreat

* Bank stocks rebound after Fed's gloomy view

By Cal Mankowski

NEW YORK, May 22 (Reuters) - U.S. stocks were mostly flat on Thursday as the price of oil weighed on sentiment as it hit another record high before retreating, offsetting gains by financial company shares.

The market began with a modest rebound in the morning after two days of steep losses. By midday, the Nasdaq composite still showed gains, but the Dow industrials and the S&P 500 were flat as investors worried about oil's impact on the economy.

Financial stocks snapped back after suffering their biggest drop in a month on Wednesday. Banks fell after the Federal Reserve slashed its growth forecasts and hiked its estimates for inflation, creating concern that the Fed is done cutting interest rates for a while.

Investors were edgy over the price of oil after it hit an all-time high above $135 per barrel before slipping to around $132.