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S&P 500 Ends Lower on First Day of Quarter for First Time Since Q4 2011; Apple Drops 3%

Stocks kicked off the second quarter on a sour note Monday following a weaker-than-expected ISM manufacturing report and as investors took a breather after the S&P 500 finally broke through its record close last week.

(Read More: After-Hours Buzz: NDAQ, URBN & More)

The S&P 500's decline marks the first time since the fourth quarter of 2011 that the index has been down on the first trading day of a quarter.

"It's unlikely that the first quarter is going to repeat itself in the second quarter," said Stephen Wood, chief market strategist at Russell Investments. "We're right at our numbers...so right about here, [we expect] some volatility to the end of the year. There seems to be a mismatch between fundamentals and sentiment and momentum."

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The Dow Jones Industrial Average slipped 5.69 points to finish at 14,572.85, dragged by Intel and Alcoa.

The S&P 500 declined 7.02 points to close at 1,562.17. The Nasdaq slumped 28.35 points to end at 3,239.17. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped above 13.

Despite the weak session, April has traditionally been the best month of the year for equities, posting an average monthly gain of 2.7 percent in the last 20 years. Also, the Dow hasn't logged a decline in April since 2005.

(Read More: After April Showers, Market Could Bounce Back)

Most key S&P sectors finished in the red, led by industrials and techs.

The S&P 500 pierced through its 2007 closing high level of 1,565.15 last Thursday, recovering all its losses from the financial crisis. The next milestone for the index is its all-time intraday high of 1,576.09, set on October 11, 2007. Meanwhile, the Dow surged more than 11 percent in the first three months of the year, posting its strongest quarter since 1998.

Strategists say a strong first-quarter performance usually implies a bullish year.

"Since 1945, whenever the S&P 500 recorded a positive performance in the first quarter, the average performance for the three remaining quarters improved by an average 1.2, 1.1, and 0.4 percentage points, respectively," wrote Sam Stovall, chief equity strategist at S&P Capital IQ, "In addition, the entire rest of the year saw its average return of 6.1 percent rise to 8.9 percent, or be improved upon by 2.8 percentage points."

But following the strong quarter, some strategists say investors should brace for a correction in the short term.

(Read More: Second Quarter Begins, Markets Are Slightly Defensive)

"Traders and investors should continue to keep an ear open for any new developments related to the events in Cyprus, even though the panic and contagion was largely contained when the banks reopened last week," according to Randy Frederick, managing director of active trading and derivatives at Charles Schwab, "From a technical standpoint, the S&P 500 is likely to consolidate around the old record high of 1,565 in the near-term, and any weakness would likely find support near 1,546."

Trading was on the lighter side as most European and some Asian markets, including Hong Kong and Australia, remained closed for Easter.

(Read More: Cramer: 3 Threats to Market Rally)

On the economic front, the manufacturing sector unexpectedly slowed in March, with the index falling to 51.3, missing expectations for 54.2, according to a Reuters poll. A reading above 50 indicates expansion in the sector.

Meanwhile, construction spending rebounded in February, rising 1.2 percent to an annual rate of $885.1 billion, according to the Commerce Department, signaling faster economic growth in the first quarter. Economists surveyed by Reuters had expected a gain of 1 percent, compared with a 2.1 percent drop in January.

Among techs, Apple declined after CEO Tim Cook apologized on the company's Chinese website for confusion over its warranty policy following heavy criticism in the Chinese media of its after-sales service. Apple said it has "improved" its repair policy for the iPhone 4 and 4S models in China, and plans to increase the "supervision and training" of authorized service providers.

Separately, Fidelity's Contrafund revealed that rival Google has replaced the iPhone maker as the firm's largest holding, according to a filing. Shares of Google have outperformed Apple over the past year by about 50 percent.

Ebay climbed after the online auction company said it expected annual earnings growth of 15 percent to 19 percent over the next three years, and is targeting an increase in revenue of as much as 68 percent for the period. At least six brokerages raised their price target on the company.

Novartis declined after the pharmaceutical company lost an attempt to win patent protection for its cancer drug Glivec in India.

Tesla Motors zoomed higher after the maker of electric cars said sales of its Model S topped expectations set in February, leading to a change in its first-quarter guidance to full profitability. Investors will also be watching for "really exciting" news due Tuesday, following last week's tweets from CEO Elon Musk.

Later this week, the ISM services sector report will be posted on Wednesday and the closely watched non-farm payrolls report will be released on Friday.

(Read More: Will the Jobs Report Keep the Bulls Running?)

—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up this Week:

TUESDAY: Factory orders, Fed's Kocherlakota speaks, Fed's Lockhart speaks, Fed's Evans speaks, auto sales
WEDNESDAY: Mortgage applications, ADP employment report, ISM non-mfg index, oil inventories, Fed's Williams speaks; Earnings from ConAgra, Monsanto
THURSDAY: BoE announcement, Challenger job-cut report, ECB announcement, jobless claims, Fed's Evans speaks, Bernanke speaks, natural gas inventories, Fed's George speaks, chain-store sales
FRIDAY: Gov't jobs report, international trade, consumer credit

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