NEW YORK (MarketWatch) -- U.S. stocks scaled back strong gains Monday, with the Dow Jones Industrial Average flirting with the 9,000 level, as enthusiasm over China's economic stimulus package was partially offset by ongoing worries about U.S. companies.
"News of the China stimulus and AIG revamped bailout was diluted by ongoing earnings carnage in the financial sector," said analysts at Action Economics.
Up more than 200 points early on, the Dow Jones Industrial Average was more recently up 80.77 points to 9,024.58, with 20 of its 30 components trading higher. Gains were led by aluminum producer Alcoa Inc. , up 6.1%.
General Motors Corp. weighed the most on the blue-chip index, falling 21.6% after Deutsche Bank said shares of the automaker were likely worthless and that GM might not be able to fund its U.S. business past December without the government's help.
The S&P 500 rose 4.1 points to 935.09, with energy, industrials and materials fronting gains among the index's 10 industry groups.
Standouts in the energy sector included Consol Energy Inc. and Peabody Energy Corp. , both up more than 7%.
Financials, consumer discretionary and information technology lagged the most, with American Capital Ltd. among the heaviest weights, off 30.9%.
The Nasdaq Composite fell fractionally to stand at 1,646.75.
Volume on the New York Stock Exchange neared 365 million, with advancing stocks running just ahead of those declining. On the Nasdaq, 230 million shares traded hands, with advancers also just ahead of decliners.
China over the weekend announced a 4 trillion yuan ($586 billion) plan to loosen credit conditions, cut taxes and embark on major infrastructure spending.
China's plan gave a major lift to commodities that had been dragged down on fears over slowing economic growth.
"It should compensate for some of the weakness in the economy that is generated by the poor outlook for exports -- but we do not see it compensating all the weakness," said economists at UBS.
On the New York Mercantile Exchange, crude-oil futures erased gains, falling 34 cents to $60.70 a barrel. .
Also on the Nymex, gold futures rose $11.7 to $745.90 an ounce.
The dollar rose against the Japanese yen but fell against the euro. .
Overseas, the Hang Seng rose 4.2% in Hong Kong, and the FTSE 100 added 2.9% in London, buoyed by commodity-related firms like Rio Tinto .
American International Group Inc. rose 16.1% as the insurer reached a deal with the U.S. government to scrap the original $123 billion bailout. The new terms allow AIG to pay less interest, as the insurer reported a loss for the third quarter of more than $24 billion. .
Circuit City Stores Inc. fell 56% after the electronics retailer filed for Chapter 11 bankruptcy protection.
NRG Energy Inc. rejected Exelon Corp.'s takeover bid.
McDonald Corp. reported another month of strong sales, and Starbucks is due to report quarterly results after the close.
Nortel Networks Corp. reported a $3.4 billion loss as revenue dropped.
U.S. stocks had ended with strong gains on Friday as investors looked past a report showing 240,000 jobs lost in October and big quarterly losses at General Motors and Ford Motor Co. . But over the past week, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite each lost about 4%.
By Kate Gibson