* Financial shares drag following a stellar week
* Dollar strengthens on euro debt worries, G20 meeting
* Indexes: Dow off 0.3 pct, S&P off 0.2 pct, Nasdaq flat
* For up-to-the-minute market news see []
(Updates to close)
By Angela Moon
NEW YORK, Nov 8 (Reuters) - 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 <> 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 <> 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. For details,
see []
"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.
TECHNICAL RESISTANCE
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.
(Reporting by Angela Moon, Editing by Kenneth Barry)
