Stocks extended losses amid volatility in oil prices, and as technology stocks slumped.
TheDow Jones Industrial Average fell more than 55 points after rising more than 70 points earlier, and after ending a volatile week slightly higher, in which the market took its cues from the oil market.
Among Dow components, Disney, Ciscoand Intel fell, while McDonald's and Exxon Mobil gained.
The S&P 500 and the Nasdaq also sank. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 20.
Most key S&P 500 sectors fell, led by technology, consumer discretionary and health care.
Oil prices will likely set the tone again on Monday, asprices rose to new 2-½-year highs on concerns that civil war was brewing in Libya, although prices fell back amid a report, citing unnamed sources, in a pan-Arab newspaper that Muammar Gaddafi is making efforts to secure his departure from the country, but U.S. officials tell NBC news the report can't be confirmed and is "unlikely" considering the situation on the ground. The BBC is carrying news of this report on a blog.
Continued unrest in Bahrain, meanwhile, intensified concerns about supply disruption, while investors also kept a close eye on top exporter Saudi Arabia, where clerics forbade protests during the weekend.
London Brent crude traded above $116 a barrel, and U.S. light, sweet crude fell back to above $105 a barrel after nearly reaching $107. Gold, meanwhile, rose to more than $1,435 an ounceon Middle East concerns.
On Friday, the February jobs report, which showed total nonfarm payrolls rising by 192,000, in line with expectations, failed to lift the market as oil prices soared. The unemployment rate fell to a 8.9 percent, slightly better than expected.
Just as the economy is showing signs of job growth, the jump in oil prices has cast worry across markets that the economic recovery could be threatened if energy prices rise too much and for too long.
Despite the volatility in oil prices, the market appeared to be ignoring oil on Monday, said Tom Schrader, at Stifel Nicolaus Capital Markets, who focuses on the energy markets. The spread between natural gas prices and crude widened, however, as oil prices fell and natural gas prices rose, Schrader said.
Leading the natural gas sector was Piedmont Natural Gas , New Jersey Resources and Vectren .
Tech stocks led the market lower on Monday, triggered by semiconductor stocks that were hit hard after Wells Fargo downgraded the sector to "market weight" from "overweight." The brokerage doesn't dislike the sector, but says sees many of the stocks as overvalued. An exception was Intel, which Wells Fargo named a "top pick." The iShares Semiconductor ETF index fell nearly 3 percent.
Meanwhile, hard drive-maker Western Digital plans to buy Hitachi Global Storage Technologies in a$4.3 billion cash and stock transaction.
Materials were also hit hard on Monday, with about 75 percent of stocks in the sector trading lower. Freeport McMoRan Copper & Gold , Louisiana-Pacific and Allegheny Technology led the sector lower.
AT&T traded flat after the company said Friday evening Chief Financial Officer Rick Lindner will retire June 1, and will be replaced by Controller John Stephens, the company said on Friday.
Starbucks gained after Morgan Stanley upgraded the coffee retailer to "overweight" from "equal weight," citing growth in domestic and international units, and the company's plans to enter the $3 billion single-serve coffee market and bring its packaged coffee business in-house.
In economic news, the Federal Reserve's policies are not responsible for rising food and energy costs, Chicago Federal Reserve President Charles Evanstold CNBC on Monday. He also said rising prices are isolated, and not an indication that inflation is on the rise.
Meanwhile, Dallas Federal Reserve Bank President Richard Fishersaid he doubted the Fed's latest efforts to stimulate the economy, known as quantitative easing 2, were doing much good, and told the Institute of International Bankers in prepared remarks that he would vote to scale back or stop the $600 billion bond-buying program if it proves to be "demonstrably counterproductive."
But Federal Reserve Bank President Dennis Lockhart said the uncertainty created by the unrest in the Middle East raises the possibility the central bank could consider more stimulus should things get worse. Lockhart spoke before a conference sponsored by the National Association for Business Economics.
Consumer credit will be the only piece of macroeconomic data out Monday, at 3 p.m.
Later this week, investors will turn their attention to trade data, weekly jobless claims, retail sales and consumer sentiment as well as the Bank of England’s monthly policy decision.
The euro rose to a four-month high above $1.40 Monday morning, reversing earlier losses for the single currency after Moody’s rating agency downgraded Greece’s sovereign debt rating by three notches.
On the Calendar:
MONDAY: Atlanta Fed President speaks, consumer credit; earnings after-the-bell from Urban Outfitters.
TUESDAY: McDonald's February sales data, 3-year Treasury note auction, BofA investor conference, Nvidia analyst meeting.
WEDNESDAY: Mortgage applications, wholesale trade, oil inventories, 10-year Treasury note auction, BofA/ML consumer conf., Citi 2011 financial services conference, anniversary of S&P 500 closing low (2009); earnings before-the-bell from American Eagle Outfitters and after-the-bell from H&R Block.
THURSDAY: BoE announcement, international trade, jobless claims, quarterly services survey, 30-year Treasury bond auction, Treasury budget, money supply, Nasdaq peak anniversary; Earnings before-the-bell from Smithfield Foods and after-the-bell from National Semiconductor.
FRIDAY: Retail sales, consumer sentiment, business inventories, S&P index rebalancing info due, Apple's iPad 2 ships; earnings before-the-bell from Ann Taylor.
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