The Dow Jones Industrial Average and the S&P 500 fell for the first time in three sessions on Monday as investors continued to weigh the coronavirus outlook while bracing for the start of the corporate earnings season.
The 30-stock Dow closed 328.60 points lower, or 1.4%, at 23,390.77. The S&P 500 dipped 1% to 2,761.63.
Caterpillar was the worst-performing stock in the Dow, falling more than 8%. The stock was pushed lower by a downgrade from a Bank of America analyst. Financials and real estate led the S&P 500 lower, with both sectors falling more than 3.5%.
But the tech-heavy Nasdaq Composite bucked the broader market's negative trend, rising 0.5% to 8,192.42 as Netflix jumped 7% to a 52-week high while Amazon advanced 6.2%. Intel rose 2.7% while Advanced Micro Devices climbed more than 5%.
Monday's moves came after the market had one of its biggest weekly gains ever last week. The Dow posted its seventh-best weekly performance, rallying 12.7%. The S&P 500 had its biggest one-week gain since 1974, jumping 12.1%.
"The market is digesting some very savory returns," said Sam Stovall, chief investment strategist at CFRA Research. "We were up 25% from trough to the most recent peak."
"While some people might say we're at the beginning of a new bull market, I think we have to take a wait-and-see attitude," Stovall said.
Wall Street's strong weekly gains came in large part because of an apparent improvement in the U.S. coronavirus outlook along with massive stimulus from the Federal Reserve.
Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said on Sunday he was cautiously optimistic that the outbreak was slowing down in the U.S. He also said parts of the country may start to reopen next month. New York Gov. Andrew Cuomo said Monday the worst may be over "if we continue to be smart."
However, Fauci added this does not mean the entire country would flip a "light switch" and go back to normal.
Confirmed cases in the U.S. now total more than 560,000, more than any other country in the world, according to Johns Hopkins University. New York state accounts for more than 190,000 of those cases. The death count in the U.S. from the virus is more than 22,000.
"The various mitigation efforts to contain the spread of COVID-19 seem to be working. What comes next is very much up in the air," said Marc Chaikin, CEO of Chaikin Analytics. "With the timing of the reopening of the economy now being debated and the economic effects of the engineered shutdown still to be determined, we urge investors to remain wary but watchful as events unfold."
Chaikin noted the market's recent rally — which led the S&P 500 to retrace half of its downside move from record highs — may set up investors for disappointment as the corporate earnings season begins.
Johnson & Johnson, JPMorgan Chase, and Bank of America are among the companies scheduled to report earnings this week. Several companies have removed their earnings guidance, citing the coronavirus outbreak, while others have slashed their profit forecasts.
The major averages are more than 18% below the records set in February. Both the Dow and S&P 500 are down 18.5% and 15.2%, respectively, for the year while the Nasdaq has fallen over 9% in 2020.
But Bruce Bittles, chief investment strategist at Baird, noted there are some technical signs that the "downside momentum has been broken."
"The rally the past two weeks has produced two sessions with upside volume overwhelming downside volume by a ratio of 10-to-1 or more," Bittles wrote in a note. "The improved breadth does not eliminate the possibility of a retest, but it suggests the magnitude of any retest could be less damaging."
CNBC's Silvia Amaro contributed to this report.
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