Stocks retreated Monday, led by financials and commodities, as the dollar rebounded.
Stocks had started higher, propelled by some encouraging earnings and economic reports, but the gains fizzled by midday.
The Dow Jones Industrial Average lost104.22, or 1.1 percent, to close at 9,867.96. The blue-chip index has now given back much of its gains from the earnings-fueled rally of the past couple weeks.
The S&P 500dropped 1.2 percent and the Nasdaq shed 0.6 percent. The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped more than 9 percent to over 24, its biggest one-day jump in two years.
The three biggest percentage decliners on the Dow were Bank of America, Alcoa and Boeing.
The dollar gained against major currenciesin what some analysts said was a technical rebound.
"Most major currencies including the euro are running out of steam," Kathy Lien, director of FX research at GFT, told Reuters. "Specifically, the euro's earlier rally wasn't really supported by data as we saw the German consumer confidence was actually weaker."
As the dollar rose, oil and gold fell — oil settled below $79 a barrelafter earlier topping $81. Gold dropped nearly $20 to below $1,039 a troy ounce.
Many analysts are predicting gold will go to $1,500 — or even higher — but Brian Belski, chief investment strategist at Oppenheimer, said he's not so sure.
"I believe the long gold/short dollar trade is as crowded right now as the long tech trade was in 1999," Belski said on CNBC this morning. "Typically and historically when you have everybody agreeing on the same trade, you should become worried."
Plus, Belski said, the typical reasons investors turn to gold — the market's headed south or hyperinflation — aren't there right now.
Among the sectors Belski likes right now are tech, industrials and healthcare.
Financials were the day's biggest decliner after Rochdale Securities analyst Richard Bove downgraded three of the industry's bigger names — SunTrust, Fifth Third Bancorp and US Bancorp .
U.S.-traded shares of ING tumbled 19 percent following news that the Dutch financial giant will split in two. The move will strip the company of much of its global profile and return it to its roots of being a small European lender. As part of the split, ING will have to sell its U.S. online-banking unit, ING Direct. This is the latest example of sweeping change imposed on firms that took government bailout money.
Analysts said the ING news raised concern that similar measures may be imposed on U.S. banks that accepted bailout funds.
Adding to pressure on the financial sector was the uncertainty about the fate of the first-time homebuyer tax credit. It is set to expire on Nov. 30. There has been buzz that it won't be extended or that it may be gradually phased out over the course of 13 months, but not expanded.
The news also took a toll on homebuilders: Hovnanian lost more than 5 percent, while Toll Brothers shed more than 4 percent.
Sen. Bill Nelson said an agreement to extend it would likely be reached "later this week."
Stocks had opened higher following an upbeat economic report and a couple of earnings beats, but that all evaporated.
Caterpillar announced plans to rehire more than 500 laid off employees by the end of the year. Still, shares fell 0.9 percent.
Verizon narrowly beat earnings estimates and added more subscribers than analysts had expected. Its shares skidded 0.7 percent.
Corning beat earnings expectations and forecast 15 percent growth in the market for glass for flat-screen TVs. Its shares dropped 0.9 percent.
Among the few gainers on the Dow were Microsoft, which rose after a slew of analyst upgrades, American Express and Intel .
RadioShack shares shot up 16 percent after the electronics retailer, which has struggled in recent years, beat revenue expectations as its push into the cell-phone market paid off.
Some encouraging news on the economic front: A new survey by the National Association for Business Economics showed U.S. companies expect to hire more peopleand invest more during the next six months — the most optimistic NABE survey in a year.
Later this week, we'll get the first look at third-quarter GDP — economists expect to see the e economy grew 3.3 percent.
Novatel Wireless shares jumped 12 percent after Barron's said the stock could move toward $20 due to sales from a new Wi-Fi network device.
Terradata shares gained 2.3 percent after Barron's said the company could hit $52 if revenue growth hits expectations.
Volume was slightly below average, with about 1.39 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 3 to 1.
This Week:
TUESDAY: Case-Shiller home-price index; Conference Board consumer confidence; Ruth Madoff hearing; Earnings from BP, Visa and US Steel
WEDNESDAY: Weekly mortgage applications; durable-goods orders; new-home sales; weekly crude inventories; executive-compensation hearing; Earnings from ConocoPhillips, GlaxoSmithKline and General Dynamics
THURSDAY: 80th anniversary of 1929 market crash; Weekly jobless claims; first look at Q3 GDP; Larry Summers speaks in NYC; Earnings from AstraZeneca, ExxonMobil, P&G, Aetna, Kellogg, Motorola and Sprint Nextel
FRIDAY: Personal income and spending; consumer sentiment; Earnings from Chevron
Send comments to cindy.perman@nbcuni.com.
