U.S. stocks sink on Greece, cash-outs; S&P 500 up Blue-chips, Nasdaq Composite lower as investors take a breather

By Laura Mandaro, MarketWatch

SAN FRANCISCO (MarketWatch) — U.S. stocks slipped Monday, though the S&P 500 eked out its fifth day of gains, as negotiations between Greece and its creditors gave investors an excuse to take profits after a double-digit advance from October lows.

The Dow Jones Industrial Average DJIA -0.09%  ended down 11.66 points, or 0.1%, at 12,708.82, breaking four days of gains. It had risen as much as 44 points to 12,764.49, its highest intraday since May 10, and fallen as much as 55 points.

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The Nasdaq Composite COMP -0.09%  lost 2.53 points, or 0.1%, to 2,784.17. The S&P 500 SPX +0.05%  reclaimed gains in the last hour of trading, closing up 0.62 point, or 0.1%, at 1,316, its highest close since July 26.

Trading was moderate, though choppy. Volume on the New York Stock Exchange was about 723 million, while NYSE composite volume was 3.7 billion — under last year’s average of 4.3 billion.

“Our concern here is that we’ve had a lot of good news over the last few months,” said Ken Tower, senior analyst at Quantitative Analysis Service. Read blog on whether U.S. stocks are overvalued.

“When the S&P was at 1,200, it was a more compelling valuation case than today. Let’s face it — the world economic outlook is still very mixed. We’re still faced with all these fiscal problems, slowing growth in China, as well as Europe,” he said.

The three major U.S. stock indexes gained more than 2% last week, rising for the third straight week and extending an advance that’s added about 20% to the benchmarks from their 52-week lows touched in early October.

SPX 1,316.00, +0.62, +0.05%

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“Simple profit taking may be the answer,” said Michael Gibbs, director of equity strategy for Morgan Keegan.

With little U.S. data on the calendar, the focus was on Europe and U.S. earnings, which have contributed to stocks’ recent run.

The Greek government was reportedly close to a deal with private creditors after the managing director of the Institute of International Finance, which is representing international banks that own Greek debt, said Sunday that bondholders have made the “maximum offer” on losses they are willing to bear.

But on Monday, investors received a dose of more unsettling headlines. Euro-zone finance ministers, who were meeting Monday in Brussels, have said Athens shouldn’t expect an increase in a planned bailout loan, said Dow Jones Newswires, citing people familiar with the matter.

Also, a Greek Finance Ministry official said Greece planned to make a formal offer to private-sector creditors on a bond swap deal by Feb. 13, according to Dow Jones.

Greece “is hurting sentiment today,” said Tower. However, much of the worries about Greece’s debt problems have already been priced in, he noted.

“They’ve already agreed to write down so much of those bonds, even if they agreed to write down more, it’s just not that big of a number,” he said. 

Stocks rose in early trading, supported by hope for those negotiations and Europe’s prospects in general.

European stocks closed higher, pushing the Stoxx Europe 600 index XX:SXXP +0.45%  up 0.5% to 257, near a five-month high. Read more on Europe Markets.

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The euro EURUSD +0.10%  topped $1.30, while the U.S. dollar index DXY +0.00% , which gauges the greenback’s performance against a basket of six other currencies, fell to 79.725 from 80.148 in late North American trade on Friday. Read more on currencies.

Investors have taken heart from recent European Central Bank actions to provide cheap loans to European banks in exchange for a wider pool of collateral, said John Derrick, director of research at U.S. Global Investors.

The central bank’s longer-term refinancing operations, which began in December, have eased concerns about “really negative outlier events,” said Derrick.

“If there’s a default in Greece or some other bad outcome, it minimizes the chance you have a run on the banks,” he said.

Movers: RIM, Bank of America, PetMed

Travelers Cos. TRV +0.44%  and Procter & Gamble PG +1.89% , off 2.1% and 1.9% each, fell the most on the Dow, with 18 of the benchmark’s 30 stocks in the red. Bank of America Corp. BAC -0.55%  led gainers, up 2.5%.

Energy stocks gained the most among the S&P 500’s ten sectors, highlighted by advances in natural-gas plays Southwestern Energy Co. SWN +0.03% , Range Resources Corp.   RRC -0.17%  and Cabot Oil & Gas Corp. COG +6.48% . Read more on Energy Stocks.

Netflix Inc. NFLX +0.63%  fell 6.3%, leading index decliners.

U.S.-listed shares of Research In Motion Ltd. RIMM -0.13%   CA:RIM -9.11%  fell 8.5% after the company its co-chief executives had resigned. Read more on RIM

Among smaller-cap stocks, PetMed Express Inc. PETS +11.00%  rallied 11% after third-quarter profit fell but beat expectations. Read more on PetMed.

Stocks in Japan finished flat on Monday, with the absence of Hong Kong and other Asian markets, closed for Lunar New Year holidays. Read Asia Markets.

In commodities, crude-oil futures for March delivery CL2H +0.23%  rose 1.3% to $99.58 a barrel. The 27-nation European Union on Monday agreed on an oil embargo against Iran as part of sanctions linked to the country’s nuclear program. Read more on oil futures.

Futures for February gold GC2G -0.14%  rose $14.30 to $1,678.30 an ounce. Read more in Metals Stocks.

Laura Mandaro is a MarketWatch editor, based in San Francisco.