U.S. stocks fell sharply on Thursday, with Wall Street recording its first negative start to a year in six, as a downgrade of Apple hit technology shares and another set of better-than-expected economic reports failed to move investors.
"I think the big issue is just how long investor enthusiasm lasts. It has certainly raced ahead of the fundamentals," said Bruce McCain, chief investment strategist at Key Private Bank.
"The trend in the data really isn't the problem, they suggest we're getting some improvement in the fundamentals. But the markets have been superlative, and you can only keep that up for so long. At some point we get a stronger corrective pullback than we've seen in the last few years or so," McCain added.
Apple fell after Wells Fargo downgraded its stock to market perform from outperform. Analog Devices dropped percent after Goldman Sachs Group reduced the circuit manufacturer to sell from neutral and Wells Fargo cut the stock to market perform from outperform. Newmont Mining rallied along with the price of gold.
The lost 135.31 points, or 0.8 percent, to 16,441.35, with General Electric leading blue-chip losses.
The fell 16.38 points, or 0.9 percent, to 1,831.98, with energy the hardest hit of the index's 10 major industry sectors, all of which were in the red.
The declined 33.52 points, or 0.8 percent, to 4,143.07.
For every stock rising, two fell on the New York Stock Exchange, where 624 million shares traded. Composite volume approached 3.1 billion.
"This may be just a normal amount of profit-taking by those that didn't want to sell in 2013," offered Elliot Spar, market strategist at Stifel, Nicolaus in an afternoon emailed note.
On the New York Mercantile Exchange, gold futures rallied 1.9 percent to $1,228 an ounce; crude futures declined $2.98, or nearly 3 percent, to $95.44 a barrel.
The dollar rose against the currencies of major U.S. trading partners, while the 10-year yield used in figuring mortgage rates and other consumer loans rose 1 basis point to 2.98 percent.
A report Thursday had falling by 2,000 to 339,000 last week.
Separate data from the Institute for Supply Management's manufacturing index came in better than expected in December.
"We've had a string of really good reports, so that's largely priced into the market," said McCain of recent economic data. "From here it's a matter of the money flows, and the best hope of continuing the rally is new retirement contributions, things that normally hit the markets at this time. By default, a lot of money is continuing to go into the equity markets."
U.S. markets were closed Wednesday for New Year's Day.
On Tuesday, Wall Street closed out 2013 at record levels, with the S&P 500 recording its best year in 16 and the Dow industrials tallying their strongest year in 18.
—By CNBC's Kate Gibson
Coming Up This Week:
Friday: Light vehicle sales for December. Earnings from Lindsay Corp.
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