Stocks ended lower in thin trading Monday, with the Dow pulling back after hitting a five-year high, amid jitters over global growth and ahead of what many forecast will be a weak earnings season.
The Dow Jones Industrial Average declined 26.50 points, or 0.19 percent, to end at 13,583.65, led by Home Depot and Hewlett-Packard . The blue-chip index traded in a tight 60-point range.
The S&P 500 declined 5.05 points, or 0.35 percent, to finish at 1,455.88. The Nasdaq slipped 23.84 points, or 0.76 percent, to close at 3,112.35.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped above 15.
Among key S&P sectors, techs and telecoms dragged, while energy turned higher.
No economic reports were released and the bond market was closed in observance of the Columbus Day holiday.
Trading volume was the second lightest all year. Volume on the consolidated tape of the New York Stock Exchange was 2.2 billion shares.
“We’re going to focus on earnings,” said Matt Cheslock trader at Virtu Financial. “We’re going to be look toward the consumer staples such as Costco [in addition to] JPMorgan and Wells Fargo at the end of the week.”
Third-quarter earnings season kicks off Tuesday with results from Dow component Alcoa after the closing bell. Analysts expect the aluminum producer to post a break-even quarter, down from reporting earnings of 15 cents a share a year ago, according to data from Thomson Reuters. (Read More: US Braces for Worst Earnings Season Since 2009)
“Third quarter, with all the economic jitters, is poised to be the worst quarter of the year in terms of earnings, but it might not be as bad as people think,” saidJimMcCaughan, CEO of Principal Global Investors. "The job numbers and housing market are suggesting the U.S. economy is doing reasonably well...so I see the likelihood of some modest positives surprise and then some momentum in sentiment pushing towards the year-end.”
Recent earnings warnings from large multinationals such as FedEx, Caterpillar and Hewlett-Packard have made investors cautious about corporate profits.
The World Bank reduced its growth forecastsfor the East Asia and Pacific region and said there was a risk the slowdown in China could worsen and last longer than many economists have forecast. (Read More: US the Brightest Spot in the World Economy)
Euro zone finance ministers meet in Luxembourg and investors will be closely watching for any clues on whether Spain is any closer to formally requesting a bailout. The European Stability Mechanism (ESM), Europe’s permanent rescue mechanism, enters into force on Monday. Spain is widely expected to be the first country to seek help from the fund.
Concerns about a next tranche of aid for Greece could also add to investors’ nerves. European markets closed broadly lower on Monday amid the political and economic uncertainty.
Netflix jumped to lead the S&P 500 gainers after Morgan Stanley raised its rating on the online movie streaming firm to "overweight" from "equalweight," saying the Amazon's video service is not a direct threat.
Facebook slumped after BTIG downgraded the social-networking giant to "sell" from "neutral" with a $16 price target. Separately, Facebook is reportedly planning to cut in half a $3-billion credit line that it had arranged prior to its IPO in May as the sharply-reduced stock price means the company doesn't need as much money to pay taxes associated with the vesting of employee shares, according to the Wall Street Journal.
Wal-Mart and American Express announced that they will introduce a reloadable prepaid cardfor shoppers.
UnitedHealth gained after the health-insurance company said it would acquire a 90-percent stakein Brazil's Amil Participacoes in a deal worth nearly $4.9 billion to gain exposure to the country's fast-growing private health-care market.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
TUESDAY: NFIB small biz index, 3-yr note auction, FedEx investors mtg, P&G shareholers mtg; Earnings from Alcoa, Yum Brands
WEDNESDAY: Weekly mortgage apps, wholesale trade, 10-yr note auction, Beige Book, Treasury budget, Wal-Mart investors mtg; Earnings from Costco
THURSDAY: International trade, jobless claims, import/export prices, oil inventories, 30-yr bond auction
FRIDAY: PPI, consumer sentiment, GM resumes Volt production; Earnings from JPMorgan, Wells Fargo
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