NEW YORK (MarketWatch) — U.S. stocks ended Monday lower in a volatile session as worries over emerging-markets currencies unsettled investors. Stocks began the day on a higher note following upbeat results from Caterpillar, but fell after home sales data showed a larger drop in December than anticipated.
Indexes tested key technical levels adding to the steep losses from their worst week in over a year, after downbeat data from China and selloffs in emerging-markets currencies triggered a global flight from equities.
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The S&P 500 (SPX) ended the session 8.73 points, or 0.5%, lower at 1,781.56, after briefly venturing into positive territory in late trade. The Dow Jones Industrial Average (DJIA) closed down for the fifth-straight session. The blue-chip index opened higher, buoyed by upbeat earnings and forecast from Caterpillar Inc, but closed 41.23 points, or 0.3%, lower at 15,837.88.
The Nasdaq Composite (COMP) was the worst performing index on Monday. At session lows, the index fell through its 50-day moving average, but pared some of the losses in late trade. The tech-heavy index lost 44.56 points, or 1.1%, to 4,083.61. Read the recap of the stock market live blog.
"Markets are looking for an excuse to take money off the table, as we had a huge rally last year, said Scott Wren, senior equities strategist at Wells Fargo Advisors.
"We are telling our retail investors that it is a buying opportunity and instead of getting out, they should be considering putting more cash to work. Retail investors should be welcoming such pullbacks, as the 12-month outlook for stocks, especially sectors such as industrials, tech and consumer discretionary, which are usually hit the most during such selloffs and become cheap," he added.
Frank Fantozzi, president and founder of Planned Financial Services, believes recent selloffs in the U.S. stock market are driven by temporary nervousness and anxiety, but said several years of bull markets lie ahead of us.
"Investors believe markets rallied too much at the end of last year. We would not be surprised to see a 10% correction sometime this year," Fantozzi said.
"We are optimistic about 2014, as capital spending by companies has picked up and will continue to rise, according to leading indicators data. If companies believe the economy is in good shape, then we will see decent earnings, which will support a further rise in the S&P 500," he added.
Upbeat results from Caterpillar Inc. initially lifted the Dow, but gains were capped amid broad-based selling. Shares of Caterpillar Inc. (CAT) , seen as an economic bellwether for global activity, rose 5.9%. The company posted fourth-quarter earnings per share of $1.54, topping forecasts, and a 44% profit gain. Cost cutting offset a sales drop of 10%. Caterpillar gave a forecast that beat analysts estimates for the year, and said it expects a $1.7 billion buyback in the first quarter of this year.
Sales of new single-family homes fell in December, but the whole of 2013 saw the highest sales level in five years, the government reported Monday. Sales of new single-family homes dropped 7% in December due to harsh winter weather. The median price of new homes ticked up in December and for 2013, the median price hit $265,800, up 8.4% from the prior year, the strongest annual growth since 2005.
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Homebuilders fell after the housing data release and several ratings downgrades. KB Home was downgraded to underweight from equalweight and Toll Brothers' rating was cut to equal weight from overweight.
Shares in KB Home (KBH) fell 2.7%, while Toll Brothers' (TOL) shares lost 1.6%.
Shares in Google Inc (GOOG) fell 2% after the company said it bought artificial-intelligence company DeepMind. Samsung Electronics Co. and Google also signed a long-term cross-licensing deal on technology patents.
Shares in Care.com Inc (CRCM) , which jumped more than 40% on debut on Friday, continued to rise, adding 2.5%.
Apple Inc (AAPL) shares slid more than 5% afterhours, as the tech group missed analysts forecast on sales of iPhones, even though earnings per share beat estimates.
Investors will also focus on the Federal Reserve this week as the central bank will take center stage on Wednesday. Most observers expect the central bank to cut its bond-buying again, by about $10 million to $65 billion a month. Expectations of Fed tapering are among the reasons Wall Street suffered its worst weekly performance in more than a year last week.
In other markets, European stocks ended lower on Monday, while Asia followed up those Wall Street losses with a 2.5% drop for the Nikkei 225 Index (JP:NIK) and a 2% loss for the Hang Seng Index (HK:HSI) . Gold pared losses and natural-gas prices (NGG14) fell.
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