By Anora Mahmudova and Carla Mozee, MarketWatch

NEW YORK (MarketWatch) -- The U.S. stock market fell on Monday, with the tech and small companies leading the losses. The main benchmarks retreated from record levels reached Thursday, as investors gear up for the second-quarter earnings season.

The S&P 500 (SPX) was 9 points, or 0.5%, lower at 1,976.10, with only the defensive sectors, such as utilities and telecoms, trading higher.

The Dow Jones Industrial Average (DJI) fell 66 points, or 0.4%, to 17,001.47. The Nasdaq Composite (RIXF), the only one of the three that didn't close at a record on Thursday, was down 31 points, or 0.7%, to 4,454.28.

The Russell 2000 (RUT) underperformed other benchmarks, falling 16 points, or 1.4%, to 1,191.42.

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Kristina Hooper, U.S. investment strategist at Allianz Global Investors, said that markets should not be overreacting to last week's jobs numbers, as it's likely that it will be inflation that will push the Fed to raise interest rates.

"Investors are digesting and rereading the jobs report, hence we are saying markets pausing after record levels. Still, we think markets are too liberal in expecting rate hikes in the second half of 2015 and will be surprised if it happens sooner," Hooper said.

Investors are easing back from their three-day July 4th weekend without confronting major economic data or assessing speeches from Federal Reserve members. The market did see fireworks Thursday after the June U.S. jobs report surpassed expectations.

The new earnings season begins Tuesday with results from aluminum producer Alcoa Inc. (AA), with another highlight coming from Wells Fargo & Co. (WFC) on Friday.

Earnings for the S&P 500 are expected to rise by 4.9% for the quarter, according to FactSet, and with stock prices extending their reach to new highs, investors are likely to be less forgiving if companies miss Wall Street's expectations. Analysts have reduced their earnings estimates by the lowest amount since the second quarter of 2011, said John Butters, senior earnings analyst at FactSet.

Among individual companies, American Apparel Inc. (APP) jumped after The Wall Street Journal reported the retailer is in talks to raise new financing following the ouster of CEO Dov Charney.

NQ Mobile Inc.(NQ) shares continued to slide following news last week that the chairman of the company's audit committee had stepped down.

King Digital Entertainment (KING) shares climbed solidly above their $22.50 IPO price, after briefly doing so last week for the first time since the March IPO flop. For more stock movers, read Movers and Shakers column.

In the commodities market, crude for August delivery (CLQ4) fell 75 cents to $103.31 a barrel, and gold futures(GCQ4) fell more than $4 an ounce to $1,316.1 an ounce.

Asian stocks closed mostly lower, with Japan's Nikkei Average down 0.4%, and European stocks fell after an unexpected and steep drop in German industrial production raises worries about growth.

The dollar (DXY) extended gains into a fourth consecutive day, with traders considering whether the U.S. jobs report for June adds more pressure on the Fed to raise interest rates sooner than later.

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