U.S. stocks closed flat Monday as news of investments in the railroad sector by billionaire Warren Buffett and strong jobs data offset worries about earnings and subprime loans.

The Dow Jones industrial average rose 8.94 points, or 0.07 percent, to end at 12,569.14. The Standard & Poor's 500 Index gained 0.85 of a point, or 0.06 percent, to finish at 1,444.61. The Nasdaq Composite Index declined 2.16 points, or 0.09 percent, to close at 2,469.18.

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The transport sector rallied after Buffett acquired a stake in three railroad companies in a vote of confidence for not only railroads, but the economy. Shares of Burlington Northern Santa Fe Corp. jumped after Buffett's Berkshire Hathaway Inc. said it acquired a 10.9 percent stake in the company to become its largest shareholder.

A potential $50 billion bid for Dow Chemical Co. (DOW) in what would be the world's biggest leveraged buyout, according to the UK newspaper Sunday Express, further bolstered demand for shares.

"Buying transport at this point in the cycle doesn't seem to suggest he (Buffett) thinks we're nearing a major slowdown in the global economy," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

The Dow Jones Transportation Average, which includes Burlington Northern's stock, was up 1.89 percent. Burlington's shares rose 6.48 percent to $88.08.

Equity markets shrugged off a surprising 4.3 percent drop in oil prices. U.S. crude oil for May delivery fell $2.77 to settle at $61.51 a barrel on some profit-taking after Iran's release last week of captured British military personnel.

A government report, released Friday when the stock market was closed, showed the U.S. economy added more jobs than expected in March.

In Monday's session, stocks reacted for the first time to the news from the Labor Department that U.S. employers added 180,000 new jobs in March, implying the economy remains resilient despite a slowdown in housing.

But worries about earnings and subprime loans kept the market's gains in check. Expectations for profit growth by Standard & Poor's 500 companies fell to 5 percent compared with a year ago, from a previous forecast of 9.2 percent when the quarter began, according to Reuters Estimates. The first major earnings reports begin on Tuesday with Dow component Alcoa (AA) Inc. .

Shares of American Home Mortgage (AHM) Investment Corp. sank 15.17 percent to $21.92 after it warned it expects lower income than previously forecast, reigniting worries about the mortgage market.

Other housing-related shares fell, including Wachovia Corp. (WB), Wells Fargo & Co. (WFC) and Washington Mutual Inc. (WM), all major mortgage lenders.

A warning from chip maker Advanced Micro Devices (AMD) underscored investors' concern about the reporting season. AMD said it expects to report first-quarter revenue below Wall Street's forecasts. But the company also unveiled a restructuring plan to cut costs, which lifted its stock. However, Goldman Sachs cut its price target on AMD's stock.

AMD shares gained 3.81 percent to $13.35 on the NYSE.

Volume was below average on the New York Stock Exchange, with about 1.26 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.78 billion shares traded, below last year's daily average of 2.02 billion.

Declining stocks were about even with advancing ones on the NYSE while decliners beat advancers by about 17 to 13 on Nasdaq.

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