NEW YORK (TheStreet) — Stocks struggled Monday as the financial sector came under pressure and markets gauged recovery prospects amid persisting fears about European sovereign debt.

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The Dow Jones Industrial Average was lower by 35 points, or 0.4%, to 9,977. The S&P 500 was lower by 2 points, or 0.1%, to 1065 and the Nasdaq was down 2 points, or 0.1%, to 2,139.
“Although we maintain many of our more constructive views on markets — the global recovery remains intact as per recent encouraging data, corporate earnings are strong, and valuations undemanding — it also appears that the shadow cast over markets by European sovereign risk is unlikely to lift soon,” said UBS economist Larry Hatheway.

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Over the weekend, leaders from the Group of Seven met to allay fears about European debt levels.

U.S. Treasury Secretary Timothy Geithner, meanwhile, insisted the U.S. will “never lose” its AAA credit rating and said global investors would always seek the safe haven of U.S. Treasuries in times of crisis.

Geithner’s statement will be put to test as soon as Tuesday, as the U.S. Treasury prepares to auction $81 billion of government securities this week.

The benchmark 10-year Treasury note weakened 4/32, lifting the yield to 3.587%.

On the an otherwise downbeat day, housing sector stocks served as a bright spot with the Philadelphia Housing Sector Index up 1.6%. Pulte Homes(PHM Quote) was up 3.9% ahead of its fourth-quarter earnings release due Tuesday.

Home improvement retailer Home Depot(HD Quote) led the Dow, helped by an upgrade to overweight from equal weight at Morgan Stanley. Shares were trading 3.1% higher to $28.84.
Chip sector stocks were also enjoying a broad improvement, as the Philadelphia Semiconductor Index went 0.9% higher.

But that wasn’t enough to outweigh declines, led chiefly by weakness in the financial sector. Bank of America(BAC Quote), Travelers Companies(TRV Quote) and JPMorgan Chase(JPM Quote) were topping the Dow’s worst performers.
Hasbro(HAS Quote) was one of the New York Stock Exchange’s highest performers after it easily beat estimates with earnings that rose 77%. Shares were trading 12.8% higher, to $34.74.

Shares of Citigroup(C Quote), Bank of America and Ford Motor(F Quote) were again seeing heavy trading on the NYSE, which had a listed volume of nearly 2.5 billion.

CVS(CVS Quote) reported fourth-quarter earnings that beat analysts’ estimates. Its stock was up 6.1%, to $32.96.

Shares of CIT Group(CIT Quote) gave up gains, sinking 0.9% in the afternoon. The commercial lender earlier named former Merrill Lynch chief executive John Thain as its new chairman and CEO.

After the close of trading, the market will hear from Principal Financial(PFG Quote), among others.

The greenback fell against a basket of currencies, with the dollar index lower by 0.2%.

In commodity markets, crude oil for March delivery was trading 44 cents higher at $71.63 a barrel. The most actively traded April gold contract added $13.40 to trade at $1,066.20 an ounce.

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