By William L. Watts, MarketWatch

NEW YORK (MarketWatch) -- U.S. stocks trimmed or erased strong earlier gains, with the Nasdaq Composite slipping into negative territory after equities initially found support on Citigroup Inc.'s quarterly results and an unexpectedly strong jump in retail sales.

The Nasdaq Composite (RIXF), which had led the initial charge higher, came back under pressure to fall 11.19 points, or 0.3%, to 3,988.54. The index led a stock selloff last week, with formerly highflying momentum stocks in the tech and biotech sectors slumping hard.

The Dow Jones Industrial Average (DJI) saw triple-digit gains in earlier activity, but was up just 44.93 points, or 0.3%, to 16,071.68 in recent trade. The S&P 500 (SPX) held on to a gain of 2.40 points, or 0.1%, at 1,818.09. Read: MarketWatch's stock market live blog.

The softer tone in the afternoon comes as the Nasdaq and the S&P 500 both posted their biggest weekly percentage declines since mid-2012 last week. So-called growth stocks have borne the brunt of the weakness, undercut by growing nervousness as earnings season picks up steam.

Bulls said further weakness may be on the horizon, but that a pullback has been overdue.

"There's no telling how long the current bout of volatility will last, or how deep the pullback will go. But if history is any guide, markets may overshoot on the way down," said Jerry Webman, chief economist at Oppenheimer Funds, in a note.

With no 2008-style systemic crises or wild, 2000-style valuation concerns and subsequent recessions currently on the horizon, Webman said that a significant selloff is likely to be "relatively contained--and prove to have been a good long-term buying opportunity."

A positive tone had been set ahead of the opening bell as stock-index futures extended gains after data showed retail sales jumped 1.1% in March, marking the biggest rise since September 2012 and topping forecasts for a gain of 0.9%. February sales were raised to show a 0.7% gain from an initial estimate of 0.3%.

(Read more: Real news in retail sales report is absence of bad news: http://www.marketwatch.com/story/real-news-in-retail-sales-report-is-absence-of-bad-news-2014-04-14.)

"Significant strength in consumer spending last month provides a strong challenge to the bearish tone of late -- not that much of the bout of selling was driven by concern for the health of the economy," said Andrew Wilkinson, chief market analyst at Interactive Brokers in Greenwich, Conn.

The data cheered investors as it offered some reassurance that soft economic data earlier this year was attributable to extreme winter weather.

"The amelioration of the chilly winter possibly had much to do with the latest reading, but the snapback in dollars spent was tremendous," Wilkinson said, in a note.

"The winter slumber is over and with confidence rising, the consumer could lead the way, if only wage gains improve," said Joel Naroff, economist at Naroff Economic Advisors in Holland, Pa.

Stocks paid scant attention to data that showed business inventories rose 0.4% in February, just shy of expectations for a 0.5% increase.

Citigroup (C) shares rose 3.4% after the bank's first-quarter results easily topped Wall Street forecasts. Citigroup reported a 3.5% rise in profit, boosted by lower expenses and provisions for soured loans, even as revenue fell. See: Citigroup's stock is cheap, but should you buy it?

U.S. stocks were shellacked last week, with the S&P 500 and Nasdaq both seeing their biggest weekly losses since mid-2012, while the Dow saw its biggest weekly fall since mid-March.

The relatively upbeat results from Citigroup stood in contrast to disappointing results Friday from J.P. Morgan Chase & Co. (JPM), which contributed to the Friday selloff. Analysts said earnings and, perhaps more important, sales results continue to hold the key to near-term direction, particularly in the tech sector, which has been hardest hit as investors grow worried that valuations have been stretched too far.

"Weak sales growth is nothing new, but now that the market appears to believe that valuations are looking rich, investors are starting to take notice. If companies can't beat sales expectations in an environment of low interest rates, when can they?" wrote Kathleen Brooks, research director at Forex.com in London.

"Johnson & Johnson (JNJ), Coca-Cola (KO), Bank of America (BAC) and Google (GOOG) are some of the blue-chip highlights to watch out for this week. If they follow J.P. Morgan and disappoint expectations we could see further downside in the markets" ahead of the Easter weekend, she said in a note. See: Google, Intel, IBM outlooks to trump earnings results.

Elsewhere, shares of Herbalife Ltd. (HLF) rose 3.8%. Shares had tumbled at the end of last week on news reports the company is the subject of a criminal investigation by U.S. authorities. The nutrition-supplement firm said Friday it wasn't aware of a probe.

Shares of Edwards Lifesciences Corp. (EW) rose 11%. The company said late Friday it won a preliminary injunction limiting the sale of Medtronic Inc.'s (MDT) CoreValve system, which had been found by a federal jury to infringe on an Edwards patent. Medtronic shares were down 2.8%.

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