* Intel shares rise after UBS upgrade
* Financial shares weigh following a stellar week
* Indexes: S&P off 0.3 pct, Dow down 0.4 pct, Nasdaq flat (Updates to midday, changes byline)
By Rodrigo Campos
NEW YORK, Nov 8 (Reuters) - U.S. stocks fell on Monday after hitting two-year highs last week, weighed by financial shares, one of the stellar sectors in the last few sessions.
The S&P financial index fell 0.8 percent to lead declines, following a 6.9 percent weekly advance.
The broad S&P 500 has risen five straight weeks and nine of the last 10. With those gains, most S&P sectors are seen as overbought, leaving the market technically susceptible to a decline. Despite Monday's dip, the uptrend was still in place.
"Every time you make new highs it doesn't necessarily mean you're going higher," said John Schlitz, chief U.S. market technician at Instinet in New York.
"But you keep the uptrend alive, and that theoretically keeps demand there when you get a pressure-relieving pullback."
The Dow Jones industrial average shed 41.10 points, or 0.36 percent, to 11,402.98. The Standard & Poor's 500 Index dipped 3.89 points, or 0.32 percent, to 1,221.96. The Nasdaq Composite Index gained 0.38 points, or 0.01 percent, to 2,579.36.
The S&P 500 faces strong resistance around 1,228, which would retrace 61.8 percent of the decline between its historic highs in 2007 and the 12-year low in March 2009. This is one of the so-called Fibonacci retracements that chartists widely follow and indicate buying and selling points.
Back in April, a first attempt to breach that level failed and preceded a decline that took the index to its 2010 low in early July.
"I'm sure people are watching the 1,228 level. We stopped at 1,227 on Friday, and that number will probably stay in play for a little while," said Schlitz.
Declines in bank shares could go beyond profit-taking from last week's gains. A pledge from the U.S. Federal Reserve to keep interest rates near record lows was viewed as hurting bank profits.
"Negative interest rates are not healthy for financial stocks, and banks still have a lot of bad debt on their books," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co in Nashville.
"I would think (financials) would continue to underperform as opposed to the tech sector, where balance sheets are a lot more healthy and earnings growth is a lot more visible."
Gains in technology stocks, including Apple Inc, up 0.7 percent to $319.14, and the semiconductor sector, up 0.3 percent, kept the Nasdaq near breakeven throughout the morning.
In corporate news, AOL Inc is exploring strategic options, including a tie-up with Yahoo Inc, and has hired financial advisers, the Wall Street Journal reported, citing sources. AOL added 2.3 percent to $25.49.
Helping Nasdaq, Intel Corp added 1 percent to $21.45 after UBS raised its rating on the stock to "buy" from "neutral" and estimated that the semiconductor sector will see another couple of quarters of inventory adjustment globally.