U.S. stocks were slightly lower on Monday in a thinly traded session after a surprise interest rate hike from China's central bank over the weekend.

In a quiet day for equities with no major economic data and corporate news, trading volume, which usually dips during the holiday season, was even lighter as a winter blizzard moved across the northeastern United States on Monday.

Retail stocks were hit as the major snowstorm on the U.S. East Coast kept many shoppers away from malls just after Christmas, casting a pall on the final act of the holiday season. The weekend's blizzard conditions, which shut down airports and halted traffic, may also signal an end to shoppers' appetite in the next few months.

The S&P 500 retail index fell 0.5 percent, underperforming the wider market.

The Dow Jones industrial average was down 28.49 points, or 0.25 percent, at 11,545.00. The Standard & Poor's 500 Index was down 1.11 points, or 0.09 percent, at 1,255.66. The Nasdaq Composite Index was down 7.42 points, or 0.28 percent, at 2,658.18.

Wall Street notched four week of gains last week.

A bit of a setback in the U.S. stock market may help fuel another rally if more of the sidelined money sees an opportunity to jump into equities and out of bonds, said Harry Michas, market analyst and stock index futures trader at Chicago-based web site IHARmarketmonitor.com.

China's central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation. The People's Bank of China said it will raise the benchmark lending rate by 25 basis points to 5.81 percent and lift the benchmark deposit rate by 25 basis points to 2.75 percent.

Among retailers, Nordstrom Inc shares fell 2 percent to $41.95 and Macy's Inc dipped 0.2 percent to $25.12. RadioShack was also off 0.4 percent at $18.41.

But financial sector was outperforming other sectors as shares of AIG rose 8.6 percent to $58.99. The bailed-out insurer and its unit Chartis Inc signed three separate credit agreements with their lenders, totaling $4.3 billion.

The S&P financial sector index gained 0.8 percent.

In other corporate news, U.S. egg supplier Cal-Maine Foods Inc reported a lower-than-expected quarterly profit, hurt by higher feed costs which the company said would remain a concern in fiscal 2011 as well. The stock was down 3.5 percent at $32.65.

(Reporting by Angela Moon, Additional reporting by Doris Frankel; Editing by)

China Storm