Stocks closed a touch lower Monday as investors digested a mixed bag of earnings reports following a two-week rally.

The Dow Jones industrial average (search) inched down just 0.37 of a point, or unchanged from a percentage standpoint, to close at 10,715.76. The Standard & Poor's 500 Index (search) was down 1.31 points, or 0.11 percent, to end at 1,201.72. The technology-laced Nasdaq Composite Index (search) was down 4.63 points, or 0.22 percent, to finish at 2,082.03.

Investors hoped the new week would extend an advance forged on mostly positive fourth-quarter earnings reports and reassuring economic data. Instead, Monday's light trading meant that many players kept to the sidelines, unsure if the rally had staying power.

"The question now is whether last week was just a technical bounce, or if there's something here that we can trade on to the upside," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati. "So today, you have people waiting to see whether these gains stick."

Shares of toy maker Hasbro Inc. (HAS) slid after its profit missed Wall Street's target, while the stock of consumer products group Clorox Co. (CLX) finished higher after posting a better-than-expected profit that rose more than six-fold.

"After some dramatic moves higher last week, a pause is certainly expected," said Donna Van Vlack, director of trading at Brandywine Asset Management.

All three major indexes rose more than 1 percent Friday, ending the week higher for the second consecutive week.

"There isn't a lot of major earnings news due this week, so you may have folks locking in some profits," Van Vlack said.

The dollar strengthened after President Bush handed a budget to Congress that forecast a narrowing in the budget deficit. The prediction of a narrower budget deficit added to optimism spawned by Federal Reserve Chairman Alan Greenspan's recent comments, suggesting a narrowing of the U.S. current account deficit.

Against the rising dollar, the euro suffered its steepest single-day decline since the first week of January to a fresh three-month low of around $1.2731, according to Reuters data. The greenback also gained against the yen to trade at 104.78 yen in late afternoon trading. A stronger dollar can help stocks because it makes U.S. equities more attractive to investors.

U.S. crude futures ended down more than $1 after OPEC producers signaled the cartel will likely wait until its meeting in mid-March to consider cutting production.

NYMEX March crude oil futures fell $1.20 to settle at $45.28 a barrel after earlier slipping as low as $45.10.

Shares of Hasbro (HAS) , the No. 2 U.S. toy maker, fell 2 percent, or 40 cents, to $20.00 after the company reported quarterly earnings that missed analysts' expectations.

The stock of health insurer WellPoint Inc. (WLP) slipped 3.2 percent, or $4.04, to $120.85 after posting lower quarterly earnings as it grappled with soaring medical costs.

Shares of Clorox (CLX) climbed almost 1 percent, or 58 cents, to $59.18 after the maker of household bleach and Glad trash bags said its quarterly profit increased more than six-fold. The company attributed profit gains to higher sales, cost savings and the transfer of some of its businesses to Henkel KGaA , a German soap and adhesives company.

Shares of Pfizer Inc. (PFE), the world's largest drug maker and a Dow component, rose 2.8 percent, or 68 cents, to $24.91 ahead of a Food and Drug Administration meeting to review the risks and benefits of painkillers, including the company's Celebrex.

Defense stocks, including Lockheed Martin Corp. (LMT) and Northrop Grumman Corp. (NOC), rose slightly. Military spending is set to keep growing in Bush's proposed budget but at a slower pace. Lockheed rose nearly 1 percent, or 49 cents, to $58.14 and Northrop gained 1.4 percent, or 75 cents, to $53.10.

In merger news, Riggs National Corp., whose banking unit pleaded guilty for failing to report suspicious transactions, said its merger with PNC Financial Services Group Inc. has fallen apart. Riggs stock fell 6.6 percent, or $1.40, to $19.85, while PNC Financial shares gained 0.7 percent, or 38 cents, to $54.58.

The Wall Street Journal reported that an external panel monitoring the safety of Merck & Co.'s (MRK) Vioxx arthritis drug had early data showing health issues — increasing concerns that the expected wave of litigation against the company would be successful. The drug was pulled from the market in September after it was found to carry an increased risk of heart attack and stroke. Merck nonetheless climbed 8 cents to $28.43.

Aircraft parts manufacturer Goodrich Corp. (GR) said strong sales to Europe's Airbus consortium and to Boeing Co. led to a sharp rise in profits for the quarter. The company beat expectations by 17 cents per share before one-time charges. Goodrich was up 93 cents at $35.43.

Trading was moderate, with 1.35 billion shares changing hands on the New York Stock Exchange, just under the 1.46 billion daily average for last year. About 1.71 billion shares were traded on Nasdaq, below the 1.81 billion daily average last year.

On the Big Board, advancing shares slightly outnumbered declining shares, while decliners narrowly outpaced advancers on the Nasdaq.

The Russell 2000 index of smaller companies was down 0.83, or 0.13 percent, at 636.61.

Overseas, Japan's Nikkei stock average surged 1.23 percent. In Europe, Britain's FTSE 100 closed up 0.78 percent, France's CAC-40 gained 0.6 percent for the session, and Germany's DAX index rose 0.62 percent.

Reuters and the Associated Press contributed to this report.