By Anora Mahmudova, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks reversed opening gains and
deepened losses on Monday after home sales data showed a a larger
drop in December than anticipated. A global rush to sell equities
outweighed an optimistic forecast from Caterpillar Inc. .
Indexes tested key technical levels adding to the steep losses
from their worst week in over a year, after downbeat data from
China and selloffs in emerging-markets currencies triggered a
global flight from equities.
The S&P 500 (SPX) was down 9 points, or 0.5%, at 1,781.40,
with eight of ten main sectors in red. The Dow Jones Industrial
Average (DJI) reversed gains and fell 34 points, or 0.2%, to
15,844.00. It was up about 48 points before the 10 a.m. housing
data.
The Nasdaq Composite (RIXF) was the worst performing index on
Monday, falling through its 50-day moving average. The tech-heavy
index fell 49.15 points, or 1.2%, to 4,078.59. Follow the stock
market live blog.
"Markets are looking for an excuse to take money off the table,
as we had a huge rally last year, said Scott Wren, senior equities
strategist at Wells Fargo Advisors.
"We are telling our retail investors that it is a buying
opportunity and instead of getting out, they should be considering
putting more cash to work. Retail investors should be welcoming
such pullbacks, as the 12-month outlook for stocks, especially
sectors such as industrials, tech and consumer discretionary, which
are usually hit the most during such sell-offs and become cheap,"
he added.
Frank Fantozzi, president and founder of Planned Financial
Services, believes recent selloffs in U.S. stock market are driven
by temporary nervousness and anxiety, but believes several years of
bull markets are ahead of us.
"Investors believe markets rallied too much at the end of last
year. We would not be surprised to see a 10% correction sometime
this year," Fantozzi said.
"We are optimistic about 2014, as capital spending by companies
has picked up and will continue to rise, according to leading
indicators data. If companies believe the economy is in good shape,
then we will see decent earnings, which will support a further rise
in the S&P 500," he added.
Upbeat results from Caterpillar Inc. initially lifted the Dow,
but gains were capped amid broad-based selling. Shares of
Caterpillar Inc. (CAT), seen as an economic bellwether for global
activity, rose 4%. The company posted fourth-quarter earnings per
share of $1.54, topping forecasts, and a 44% profit gain. Cost
cutting offset a sales drop of 10%. Caterpillar gave a forecast
that beat analysts estimates for the year, and said it expects a
$1.7 billion buyback in the first quarter of this year.
Sales of new single-family homes fell in December, but the whole
of 2013 saw the highest sales level in five years, the government
reported Monday. Sales of new single-family homes dropped 7% in
December due to harsh winter weather. The median price of new homes
ticked up in December and for 2013, the median price hit $265,800,
up 8.4% from the prior year, the strongest annual growth since
2005.
Read: How much gas in economy's tank? Let's see
Homebuilders fell after the housing data release and several
ratings downgrades. KB Home was downgraded to underweight from
equalweight and Toll Brothers' rating was cut to equal weight from
overweight.
Shares in KB Home (KBH) fell sharply, down 5.5%, while Toll
Brothers' (TOL) shares lost 2.4%.
Shares in Google Inc (GOOG) fell 2% after the company said it
bought artificial-intelligence company DeepMind. Samsung
Electronics Co. and Google also signed a long-term cross-licensing
deal on technology patents.
Shares in Care.com Inc (CRCM), which jumped more than 40% on
debut on Friday, continued to rise, adding 6.6%.
Investors will also focus on the Federal Reserve this week as
the central bank will take center stage on Wednesday. Most
observers expect the central bank to cut its bond-buying again, by
about $10 million to $65 billion a month. Expectations of Fed
tapering are among the reasons Wall Street suffered its worst
weekly performance in more than a year last week.
In other markets, European stocks were lower on Monday, while
Asia followed up those Wall Street losses with a 2.5% drop for the
Nikkei 225 Index and a 2% loss for the Hang Seng Index . Gold pared
losses and natural-gas prices(NGG14) fell.
More must-reads from MarketWatch:
How investors should read the news
Stock investors trash market darlings, face Apple, Fed
Subscribe to WSJ: http://online.wsj.com?mod=djnwires