* Caterpillar profit stronger than expected, shares rally
* Apple earnings due after markets' close
* U.S. new home sales fall for second straight month in Dec
* Indexes lower: Dow 0.4 pct, S&P 0.7 pct, Nasdaq 1.5 pct
NEW YORK, Jan 27 (Reuters) - U.S. stocks fell on Monday, extending last week's steep selloff, as weaker-than-expected new home sales data and ongoing concerns about emerging markets weighed on investor sentiment.
The technology sector was the biggest loser with the Nasdaq falling nearly 1.5 percent. The Dow industrial average, although in negative territory, was outperforming the broader market thanks to Caterpillar Inc which reported better-than-expected results.
"Earnings gave investors hope but the reality of all the moving parts of emerging markets and weak home sales made them rethink how good results from a handful of companies really are," said Kim Forrest, analyst at Fort Pitt Capital Group Inc.
Investors were also cautious ahead of the Federal Reserve's two-day policy meeting that begins on Tuesday. Many market participants expect another selloff if the Fed decides to keep withdrawing its stimulus, further pressuring equities already roiled by a flight from emerging markets last week.
Big technology names weighed on the market. Google shares were off 3.4 percent at $1,085.26. Microsoft shares lost 2.2 percent to $36.01.
The Dow Jones industrial average fell 58.02 points or 0.37 percent, to 15,821.09, the S&P 500 lost 12.95 points or 0.72 percent, to 1,777.34 and the Nasdaq Composite dropped 61.438 points or 1.49 percent, to 4,066.736.
The day's declines followed a steep selloff last week, raising concerns that the market may be in for a major correction. The S&P 500 fell 2.6 percent for the week, closing below its 50-day moving average for the first time since Oct. 9, suggesting more selling may be ahead for the market that closed out 2013 with a 30-percent gain.
"The decline today seems to be technical. We fell below the 1,800 level (on the S&P) and that accelerated the selling. The next level of support is 1,775. I don't think we are in a correction yet but if we go below this level, then we might have to reassess," said Peter Cardillo, chief market economist at Rockwell Global.
Caterpillar shares jumped more than 4 percent to $89.70 after posting stronger-than-expected quarterly profit. Cost cuts and an uptick in demand for building equipment offset continued weak sales to the mining industry.
Apple Inc is due to report earnings after the close of trading. It may notch its most successful holiday shopping season yet, setting records for sales of its gift-friendly iPhones and iPads. Apple will, however, continue to draw investor scrutiny over sales in ultra-competitive China, its No. 2 market but a drag on revenue and margins in recent quarters.
In economic news, sales of new U.S. single-family homes fell more than expected in December, but lean inventories and steady price gains suggested sufficient strength in the housing market to support the economy.
U.S. mobile group AT&T has ruled out a bid for Britain's Vodafone for now, with banking sources saying a U.S. spying scandal and a surge in European telecom shares may have disrupted a deal that many think could still happen. U.S.-listed shares of Vodafone fell 4percent to $36.53.