Wall Street flat, rally could resume on earnings

NEW YORK (Reuters) - Stocks were little changed on Monday as recent earnings reports and development in the euro zone provided little incentive to disrupt the recent tone for equities on the heels of the best weekly performance by the S&P 500 in a month.

U.S. stocks are up nearly 5 percent for the year as an improving U.S. economy and earnings that have largely met expectations have boosted investor optimism. The Dow and S&P 500 both had their best weekly performances in a month last week.

According to Thomson Reuters data, 15 percent of S&P 500 companies have reported earnings, with 59 percent posting results above Wall Street expectations.

While the percentage of fourth-quarter earnings reports that beat estimates has trailed recent quarters, the rate is expected to improve as earnings season picks up steam. For the week of January 23, 117 S&P 500 companies are expected to report earnings.

"This is the momentum trade. The market got out of gates very strong this year," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

"Earnings have been very cooperative in terms of keeping the tone positive. Macroeconomic data out of Washington has remained slightly better than expected, the employment numbers have helped. There are a lot of parts to this puzzle that are supporting a positive tone and a constructive internal character to the market."

The euro zone crisis was still lurking in the background. Germany and France pushed for a deal between Greece and its private creditors and said they remained dedicated to a new bailout that is needed by March to stave off a default. Euro zone finance ministers could decide later Monday what debt restructuring terms they would accept.

The Dow Jones industrial average <.DJI> was down 35.20 points, or 0.28 percent, at 12,685.28. The Standard & Poor's 500 Index <.SPX> dipped 2.61 points, or 0.20 percent, at 1,312.77. The Nasdaq Composite Index <.IXIC> was off 8.48 points, or 0.30 percent, at 2,778.22.

Halliburton Co shares fell 3.2 percent to $35.03 after the world's second largest oilfield services group warned the deep slump in U.S. natural gas prices could cause near-term disruptions that pinch first-quarter earnings.

Research In Motion Ltd's fell 6.6 percent to $15.87 as analysts were skeptical about the resignation of the BlackBerry maker's co-chief executives.

Sears Holding Corp advanced 3 percent to $50.47, easing from a session high of $54.76 in what analysts said could be a short squeeze.

The stock is the most shorted stock in the S&P 500, according to Data Explorers, with 94 percent of shares available used to sell short. The retailer has been the best performing stock in the index for the year, up more than 50 percent.

"That is a classic short squeeze. There have been headlines all over the name now for the better part of a month or so and it's largely been quite negative," said Knight Capital's Kenny.

Chesapeake Energy Corp gained 4 percent to $21.80 after it said it will reduce dry gas drilling and cut production in response to natural gas prices falling below "economically unattractive levels".

(Reporting By Chuck Mikolajczak; editing by Jeffrey Benkoe)

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