Stocks fell as investors awaited the start of the earnings season and shrugged off a spate of mergers and acquisitions activity.
The Dow Jones Industrial Average fell more than 60 points, after a week that ended with the major indexes falling in the wake of a disappointing December jobs report.
DuPontAT&T and Microsoft led blue-chips lower, while GE rose.
The S&P 500 and the Nasdaq also declined. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 18.
Most key S&P 500 sectors slipped, led by utilities, energy and telecom.
Monday's market weakness may also reflect some hesitance on the part of investors ahead of earnings this week, first from Alcoa after the closing bell, and later this week from Intel , said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research.
"There's a little bit of trepidation ahead of those numbers and rightfully so," Detrick said.
While Detrick expects the market will move higher this year, and that generally, investors expectations on the economy and the market are too low, he said the market is overbought at current levels. "Earnings season could be next major driver going forward," he said.
In one bullish sign for the markets, money appears to be returning to hedge funds as well as stock mutual funds. "I do think that’s a good sign," Detrick added.
About $13 billion flowed into hedge funds in November, representing the fifth straight month of inflows, and the most since February 2010, TrimTabs Investment Research and BarclayHedge said Monday.
Equity long-short funds attracted the most cash with $2.5 billion flowing into those funds, TrimTabs and BarclayHedge said. According to the firms, hedge funds returned 11.6 percent in 2010, which is less than the 12.8 percent gain of the S&P 500 last year.
In M&A activity, DuPont offered to buy Danish food ingredients and enzymes firm Danisco for $5.8 billion. The U.S. chemicals firm plans to use the deal to boost its position in the food sector.
Duke Energy reached a deal to buy Progress Energy for $46.13 a share to create the nation's largest energy company. The deal represents a modest 4 percent premium over Friday's closing price for Progress.
Johnson & Johnson reportedly approached Smith & Nephew to buy the European maker of replacement knees and hips, but was rejected. Smith & Nephew's ADRs gained.
And Sara Lee may be the target of an acquisition by private equity firms including Apollo Global Management.