Stocks kicked off the week with sharp losses, with all three major averages posting their worst one-day performance this year, amid renewed worries over Europe and as investors took a pause after the Dow topped 14,000 for the first time since October 2007 last week.
The Dow Jones Industrial Average dropped 129.71 points, or 0.93 percent, to close at 13,880.08, dragged by Travelers and Merck, after finishing above the psychologically-important 14,000 level for the first time since October 2007 last Friday.
The S&P 500 slumped 17.46 points, or 1.15 percent, to finish at 1,495.71. The Nasdaq tumbled 47.93 points, or 1.51 percent, to end at 3,131.17. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, surged near 15.
All key S&P sectors finished in negative territory, led by financials and techs.
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"It still feels to me like we could trade marginally higher towards the State of the Union [address on Feb. 12], which I think will represent a point of letdown for the market and we'll finally get a 5 to 7 percent pullback and how we come off that reaction will tell us a lot about the future direction over the next few months," said Jeffrey Saut, chief investment strategist at Raymond James.
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Investors will also be watching Thursday's ECB interest rate announcement and press conference later this week.
Among earnings, Clorox rose after the household-products maker topped estimates and raised its full-year revenue forecast. Meanwhile, Gannett tumbled even after the newspaper chain posted a gain in quarterly revenue, thanks to robust ad sales at its TV stations.
So far, 256 S&P 500 companies have posted quarterly results this quarter, with 68 percent of firms topping earnings expectations, while 64 percent have exceeded revenue estimates, according to Thomson Reuters. If the remaining companies report earnings in line with estimates, earnings will be up 4.4 percent from last year's fourth quarter.
McGraw-Hill slumped to lead the S&P 500 laggards after federal prosecutors plan to file civil charges against ratings agency Standard & Poor's for wrongdoing in its rating of mortgage bonds prior to the 2008 financial crisis. Moody's also traded sharply lower.
McDonald's announced it is offering 'Fish McBites,' a new Happy Meal entree starting this week through March, to coincide with Lent. The latest children's set meal is the fast-food giant's first new entree in nearly a decade. However, shares traded lower along with the broader market.
Herbalife plunged more than 10 percent after the New York Post reported that the nutrition and weight-loss products company is being investigated by law enforcement officials. The newspaper said the FTC did not say whether the action was civil or criminal. Meanwhile, Herbalife demanded a correction from the New York Post, saying other than voluntary dialogue with regulators, the company is unaware of any regulatory interest or investigation.
Research In Motion has changed its company name to BlackBerry and will now trade under the ticker symbol 'BBRY', though formal approval won't come until the smartphone maker's annual meeting this summer. Bernstein upgraded its rating on the company to "outperform" from "market perform" and lifted its price target to $22 from $12 amid enthusiasm over the BlackBerry 10 debut.
Facebook fell to lead the Nasdaq 100 laggards, extending a decline that started last week, after shares hit their highest level since July.
On the economic front, factory orders rose 1.8 percent in December, according to the Commerce Department, which was lower than the 2.2 percent gain economists expected, according to a Reuters poll.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
TUESDAY: ISM non-mfg index, Blackberry Z10 available in Canada, new Apple 128 GB iPads available; Earnings from Toyota, UBS, Estee Lauder, Kellogg, NYSE Euronext, Sirius XM Radio, Disney, Aflac, Chipotle, Panera Bread, Shutterfly, Take Two Interactive, Zynga
WEDNESDAY: Weekly mortgage apps, oil inventories; Earnings from Arcelor Mittal, GlaxoSmithKline, CVS Caremark, IntercontinentalExchange, Marathon Oil, Ralph Lauren, Time Warner, News Corp, Visa, Akamai, Allstate, Green Mountain Coffee, Yelp
THURSDAY: Bank of England announcement, ECB announcement, jobless claims, productivity and costs, consumer credit, Fed balance sheet/money supply, chain-store sales; Earnings from Credit Suisse, Philip Morris, Sony, Cigna, Noble Energy, Sprint, NYTimes, Activision Blizzard, Hasbro, LinkedIn, Coinstar, Opentable
FRIDAY: International trade, wholesale trade, monthly crop report; Earnings from Nissan, Moody's
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