U.S. stocks fell on Monday, with the Dow Jones Industrial Average extending declines after its worst week since November 2011, as investors pondered the Federal Reserve's plan to reduce asset purchases and worried about China's economy.
"We're seeing a carryover from what we had at the end of last week; there are increasing concerns about the emerging China story and currencies, specifically of Argentina and Turkey, that are casting a pall over the market. And this comes at a point at which valuations are full, so the market is ripe for a setback," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
"Earnings are coming in okay, but not spectacular, which is enough to cause congestion in the markets," he added.
Apple gained ahead of the iPhone maker's first-quarter earnings report after the close.
Monday's economic data had the Commerce Department reporting new home sales totaled 414,000 in December versus a 458,000 estimate.
Caterpillar shares rose after the mining-and-construction-equipment maker announced earnings, with its CEO noting "signs of improvement in the world economy." The optimism voiced by Doug Oberhelman extended to emerging markets, a source of concern for investors in recent weeks.
"The reality facing U.S. investors remains one of diminished political risk, solid earnings, strengthening economics and diminishing Fed bond purchases. This reality, combined with the relative valuation implications of declines in both stock prices and interest rates since the start of the year, still points to the opportunity in being a little over-weight equities and under-weight fixed income," David Kelly, chief global strategist at J.P. Morgan Funds, wrote in emailed commentary.