Energy closed down 4.5 percent as the greatest laggard in the S&P, followed by a more than 3 percent decline in materials.
"This downtrend (Monday), it's really only the energy, materials and industrials that are down but everything else is holding in there," said Ilya Feygin, managing director and senior strategist at WallachBeth Capital.
"We're kind of in a sightly new environment because there's not a big rush to get out of equities, period. Just out of underperformers," he said.
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Materials, financials, energy and industrials were the greatest laggards in the S&P for the year so far, each down nearly 10 percent or more year-to-date as of the close Monday.
Caterpillar closed down 5 percent as one of the greatest weights on the Dow. Goldman Sachs downgraded the heavy equipment maker's stock to "sell" from "neutral" on expectations of lower returns on capital amid lower global infrastructure investment.
"The CAT downgrade... brings back all the questions concerning China and emerging markets," Krosby said.
Goldman Sachs lost 3.66 percent to also contribute to declines on the Dow despite an upgrade to "buy" from "neutral" and price target increase by Nomura Securities.
The Nasdaq composite closed more than 1.5 percent lower as most major tech names declined and biotech stocks weighed. Amazon eked out a 0.03 percent gain.
The Dow transports closed nearly 1.9 percent lower, with Alaska Air leading nearly all constituents lower.
Oil settled down 5.75 percent, or $1.85, at $30.34 a barrel, reversing much of Friday's a 9 percent surge as Iraq's announcement of record-high oil production in December renewed concerns about oversupply.
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"Today specifically I think it's what's happening with oil," said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
"None of the earnings reports that we've seen thus far have been able to move the market overall," he said. But "if oil settles down, if not stabilizes, we might be able to see some gains."
McDonald's closed up 0.68 percent, well off session highs and one of three advancers in the Dow.
The stock briefly jumped more than 2.5 percent in morning trade to hit a record intraday high after the fast food giant said global same-restaurant sales rose a better-than-expected 5 percent, helped by the launch of all-day breakfasts in the United States and recovering demand in China. U.S. sales increased 5.7 percent. The firm also posted earnings that beat on both the top and bottom line.
"The backdrop is oil but the good news is we're paying attention to other things as well," said Art Hogan, chief market strategist at Wunderlich Securities.
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Halliburton reported earnings 7 cents above estimates on revenue slightly below forecasts, but the oilfield services giant was able to benefit from cost cuts amid falling oil prices. The stock reversed initial gains to close 3 percent lower.
D.R. Horton posted earnings that topped expectations, with revenue also above estimates. Sales orders were up 9 percent from a year earlier, with the value of those orders rising by 12 percent. The stock closed down 3.7 percent.
Shares of Kimberly-Clark declined nearly 3.2 percent after the firm reported quarterly results that missed slightly on both earnings and revenue, noting impact from unfavorable foreign currency trends. Organic sales did rise by 5 percent.
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More than 100 S&P 500 firms are due to report this week. Major tech firms set to announce quarterly results in the next few days include Apple on Tuesday, Facebook on Wednesday and Amazon.com and Microsoft on Thursday.
"All the pain in earnings has been taken up front with massive slashing of forecasts," said Jeremy Klein, chief market strategist at FBN Securities.
"I think (earnings are) going to reengage investors who have been sitting out of this market because of volatility," he said.
In other corporate news, Johnson Controls, a U.S. maker of car batteries and heating and ventilation equipment, said it would merge with Ireland-based fire protection and security systems maker Tyco International. Shares of Johnson Controls closed 3.9 percent lower, while Tyco jumped 11.6 percent.
Shares of Sprint plunged 12.2 percent after reports the firm will cut 2,500 jobs as part of a $2.5 billion cost savings plan.
No major economic data was expected Monday. The Dallas Fed January manufacturing production index came in at negative 10.2 versus 12.7 in December. The business activity index was minus 34.6 versus minus 21.6 the previous month.
Consumer confidence is due Tuesday, ahead of consumer sentiment and fourth-quarter GDP on Friday.
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Also in focus is the Federal Reserve meeting Tuesday and Wednesday, as well as the Bank of Japan's meeting later in the week.
"While we have economic news, all eyes are going to be on the Fed and do they offer any (interpretation) on recent events," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
Treasury yields held lower, with the 2-year yield near 0.87 percent and the 10-year yield at 2.01 percent.
The U.S. dollar index traded slightly lower against major world currencies, with the euro above $1.08 and the yen at 118.49 yen against the greenback.
Excessively low inflation hurts consumers and damages the European Central Bank's credibility, Mario Draghi, the bank's president said on Monday, defending loose monetary policy and the bank's December rate cut.
On Thursday, Draghi's remarks raised expectations of stimulus at the ECB's March meeting and boosted both European and U.S. equities.