NEW YORK -- Stocks bounced betweensmall gains and losses before ending the day down as troubling economicnews from China outweighs optimism about more stimulus from the FederalReserve.
The stumble marks a pause in a rallylast week that took the Dow Jones industrial average and the Standard& Poor's 500 to their highest levels in more than four years.
Stockmarkets rose last week after the European Central Bank announced along-anticipated plan to support struggling countries in the EuropeanUnion.
On Friday, after aweaker-then-expected August employment report, investors became morehopeful that the Fed will act this week to support the U.S. economy.
Manyanalysts remain skeptical that the Fed will do anything more thanreiterate its low interest-rate guidance at the conclusion of itstwo-day meeting on Thursday, as it won't want to be seen as gettinginvolved less than two months ahead of the U.S. presidential election.
"Thereis a danger that the Fed could become the focus of a majorRepublican-Democrat argument," said Fawad Razaqzada, market strategistat GFT Markets.
Still, Fed chairman BenBernanke has said U.S. jobs data will be crucial in determining whetherthe central bank backs another monetary injection.
Traderswill have a number of events to monitor in Europe over the next fewdays, including a meeting of euro finance ministers as well as theGerman Constitutional Court's verdict on the legality of Europe'splanned permanent bailout fund.
Greece's debtinspectors are also due to hold more meetings with the Greek governmentas they prepare their latest assessment of the country, which coulddetermine its future in the euro currency.
Stocksand the euro posted solid gains last week as tensions over Europe'sdebt crisis eased after European Central Bank president Mario Draghioutlined a new bond-buying program designed to ease the pressure onItaly and Spain.
"There does still seem to bean air of optimism around, particularly regarding Europe," said DavidJones, chief market strategist at IG Index. "While the economy is farfrom out of the woods yet, it seems the chances of lurching into anothersovereign debt crisis have been greatly reduced by Mario Draghi'sproposal."
In Europe, stocks also took abreather Monday. In Europe, Germany's DAX was steady at 7,217 while theCAC-40 in France fell 0.3% percent to 3,509. The FTSE 100 index ofleading British shares was 0.1% higher at 5,799.
Theresponse to the ECB plan in the bond markets continues to be positive.The yield on Spain's 10-year bonds was down 0.3 percentage point Mondayto 5.7% while the yield on its three-year bond dropped 0.15 percentagepoint at 3.47%. For a number of months now, Spain's 10-year yield hastraded around the 7% mark that is widely-considered unsustainable in thelong-run.
In the currency markets, the eurogave up some of Friday's big advance, trading 0.3% lower at $1.2783. OnFriday, Europe's single currency rose to $1.2818, its highest levelsince May 22, after a lower than expected 96,000 increase in U.S.nonfarm payrolls in August ratcheted up expectations of another monetarystimulus from the Fed.
Earlier in Asia,stocks were mixed after figures showed Chinese imports shrank and exportgrowth was muted in August. That came on top of the release over theweekend of data showing sluggish Chinese industrial production andinvestment.
Even so, the Shanghai Composite Index gained 0.3% to 2,134.89 and the smaller Shenzhen Composite Index added 0.9% to 899.72.
Japan'sNikkei 225 fell marginally to close at 8,869.37 after the governmentsaid the economy grew at a slower pace than earlier estimated for theApril-June quarter. Growth stood at an annual 0.7%, slower than the 1.4%given in August.
South Korea's Kospi fell 0.3% to 1,924.70. But Hong Kong's Hang Seng gained 0.1% to 19,827.170.
Oil markets were also fairly subdued with the benchmark New York rate down 81 cents to $96.61 per barrel.