U.S. equities closed lower Monday as investors weighed a possible Federal Reserve rate hike in December.
"Perhaps it's worries about the legitimacy of the Federal Reserve lifting interest rates and that equity valuations — which have been in full — need to be re-rated," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
The odds of the Fed raising rates for the first time in about a decade rose dramatically after the October nonfarm payrolls report — released Friday — showed the U.S. economy added 271,000 jobs.
According to the CME Group, the probability of a December rate hike rose from about 58 percent to about 70 percent.
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U.S. stocks opened lower and soon proceeded to extend losses, with the Dow Jones industrial average falling as much as 242.55 points at its session lows before paring gains slightly ahead of the close.
"I think there was some bargain hunting this afternoon," said Kim Forrest, senior equity analyst at Fort Pitt Capital.
The blue chips index also fell back into negative territory for the year as IBM contributed most of the losses.
Dow Jones industrial average YTD
The S&P 500 closed down nearly 1 percent lower as consumer discretionary and energy both fell over 1 percent.
"The market giving back here is a reflection of weak growth," said Nick Raich, CEO of The Earnings Scout.
Overnight, China said October exports fell 6.9 percent from a year ago, while imports dropped 18.8 percent, both missing expectations.
"Concerns over global growth and the OECD triggered [the move lower] this morning," said Kate Warne, investment strategist at Edward Jones. "I think you're seeing investors position their portfolios with less risk."
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The major indexes posted a six-week winning streak on Friday, gaining at least 1 percent.
"We're coming off a very good week and the narrative has certainly changed in terms of monetary policy," said Art Hogan, chief market strategist at Wunderlich Securities. "We've been too low for too long, and I think the path toward normalization starts in December."
"In short, this is a perfectly normal/healthy pullback," said Adam Sarhan, CEO of Sarhan Capital. "We were long overdue."
"The key going forward is going to be analyzing the pullback."
The jobs report also sent U.S. Treasury yields and the dollar surging.
"The market is going to focus on a number of factors [including] the narrowing of the yield curve, which suggests the Fed is gearing up for a rate hike," said Peter Cardillo, chief market economist at Rockwell Global Capital.
Benchmark 10-year yields held at 2.35 percent while two-year yields traded at 0.89 percent.
The dollar gained over 1 percent against a basket of currencies on the jobs report but traded near the about 0.2 percent lower Monday.
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"Parity with the euro is on sight," Cardillo said.
"Everyone should keep an eye on the [dollar index]," Raich said. "If that keeps rising, you know what it will do to corporate earnings."
There are no major economic data points due Monday, but Friday will feature October retail sales.
Hogan said it would be the upcoming data's job to dissuade the central bank from raising rates.
Randy Frederick, managing director of trading and derivatives at Charles Schwab, said "the pivotal decision will be in the November jobs report, which we won't get for another four weeks."
"It's a pretty light week [in terms of data]," Frederick said "Aside from that, it's going to be a continuation of this conversation about a December rate hike."
Investors also kept an eye in oil, after OPEC said it expected global demand to remain strong next year.
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"We're back at [about] $45 on WTI; that's constructive," Hogan said. "If you look at the correlation between oil and S&P 500, it's been very tight over the past three months."
U.S. oil settled down 42 cents, or 1 percent, at $43.87 a barrel.
European equities closed lower on weak Chinese export data.
In Asia, equities in China and Japan rose their highest levels in over two months.
In corporate news, Plum Creek Timber, Dish Network and Hertz Global reported earnings before the bell. SunEdison, Lions Gate and Rackspace are all due after the bell.
DuPont named Edward Breen as its permanent chairman and chief executive officer.
L Brands was downgraded to "neutral" from "overweight" at JPMorgan Chase, based in part on unfavorable apparel industry trends.
Major U.S. Indexes
The Dow Jones industrial average closed down 179.85 points, or 1 percent, at 17,730.4, led lower by Caterpillar with DuPont and Walt Disney the only advancers.
The closed 20.62 points lower, or 0.98 percent, at 2,078.58, with energy leading nine sectors lower and utilities the only advancer.
The Nasdaq closed down 51.82 points, or 1.01 percent, at 5,095.3.
Decliners led advancers 4 to 1 at the New York Stock Exchange, with an exchange volume of 969.1 million and a composite volume of 3.840 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded above 16.
Gold futures settled up 40 cents at $1,088.10 an ounce.
On tap this week:
Monday
Earnings: SunEdison, Lions Gate, Rackspace
Tuesday
Earnings: Tencent, Vodafone, DR Horton, Rockwell Automation, Wayfair, Amdocs, China Lodging Group,Kinross Gold
6 a.m.: NFIB
8:30 a.m.: Import Prices
10 a.m.: Wholesale Trade
2:30 p.m.: Chicago Fed President Charles Evans
Wednesday
Earnings: Macy's, ADT, NetEase, Popeyes Louisiana Kitchen
Thursday
Earnings: SABMiller, Siemens, Advance Auto Parts, Burberry, Kohl's, Viacom, Energizer, Cisco Systems, Petrobras, Applied Materials, Nordstrom, Blue Buffalo, El Pollo Loco, Party City, Planet Fitness, Sunrun
8:30 a.m.: Jobless Claims
9:05 a.m.: St. Louis Fed President James Bullard
9:30 a.m.: Fed Chair Janet Yellen delivers welcoming remarks at the Federal Reserve's Conference
9:45 a.m.: Richmond Fed President Jeffrey Lacker
10 a.m.: JOLTS
10:15 a.m.: Chicago Fed President Charles Evans
11:45 a.m.: New York Fed President Bill Dudley
2 p.m.: Federal Budget
6 p.m.: Federal Reserve Vice Chairman Stanley Fischer
Friday
Earnings: Tyco, Berry Plastics, JC Penney, WGL Holdings
8:30 a.m.: Retail Sales; Retail Sales ex-autos; PPI; PPI ex-food & energy
10 a.m.: Consumer Sentiment; Business Inventories
12:30 p.m.: Cleveland Fed President Loretta Mester
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— CNBC's Peter Schacknow and Reuters contributed to this report.