By William L. Watts and Victor Reklaitis, MarketWatch

NEW YORK (MarketWatch) -- Stocks posted a mixed performance Monday, with the Dow industrials slipping into negative territory as investors hesitated to chase equities to new highs ahead of potentially market-swaying economic data and uncertainty over exactly when the Federal Reserve could begin to throttle back the flow of monetary stimulus to the economy.

Stocks had initially gained ground after a report on factory orders that roughly matched expectations, with bulls also finding temporary solace in remarks by St. Louis Federal Reserve Bank President James Bullard.

The S&P 500 (SPX) was last up 2 points, or 0.1%, to 1,764, while the Dow Jones Industrial Average (DJI) dropped 10 points, or 0.1%, to 15,606.

The Nasdaq Composite(RIXF) held on to a gain of 5 points, or 0.1%, to 3,927.

"The market's Kryptonite is early taper talk at the moment, and this first full week of November has the potential for it to be hurled at it from all directions with no shortage of U.S. economic data on the agenda, including the all-important October payrolls report and the advance estimate of [third-quarter] GDP," said Jim Reid, strategist at Deutsche Bank, in a note. Reid said there had been some signs of risk being taken off the table already, noting pullbacks in emerging-markets equities, fixed income and currencies.

Also, a "stretched" valuation for the S&P 500 indicates further gains will be sluggish, said analysts at futures broker R.J. O'Brien in Chicago.

"We still look for a generally rising stock market into 2014 but there is likely to a lot of sideways action with only a modest upward bias. The medium-term earnings outlook looks positive, but the S&P 500 is already trading at the relatively rich level of 15.9 times forward earnings. That is well above the five-year average of 14.0 and the 10-year average of 14.8," they said, in a note.

"Due to stretched valuations, we believe the stock market will only be able to climb as fast as earnings grow," the R.J. O'Brien analysts said, adding that the "good news" is that the market is looking for strong earnings growth of 11.3% in 2014 after growth of only 5.8% this year.

Bullard told CNBC that the Federal Reserve did not have to be in a "hurry" to pare its $85 billion-a-month in bond purchases, because inflation is low. On the other hand, Bullard also made several comments that suggest a taper could come soon.

U.S. factory orders for September rose 1.7%. That met the consensus forecast from a MarketWatch poll of economists. Other surveys called for a 1.8% gain.

In other Fed news, Dallas Fed President Richard Fisher suggested in Sydney on Monday that tapering of bond buys could come sooner than expected, and that fiscal risks shouldn't stop the Fed from doing what is right for the economy. At 11:40 a.m. Eastern, Fed Governor Jerome Powell will speak on Fed policy and emerging markets at a conference in San Francisco.

At 2 p.m. Eastern, Boston Fed President Eric Rosengren, a voting member of the Fed's policy-making committee, will talk about the economy at the University of Massachusetts in Boston.

A strong October for stocks, with the S&P 500 gaining 4.5% and hitting record highs, has left some strategists cautious. "The outsized gains the stock market enjoyed in October [...] suggest a pause is likely before the year-end rally continues," said Bruce Bittles, chief investment strategist at Robert W. Baird & Co., in a note on Monday. Bittles and other strategists say the principal driver for stocks continues to be Fed policy. (Read more: The next pain trade involves March taper assumptions http://blogs.marketwatch.com/thetell/2013/11/04/the-next-pain-trade-involves-march-taper-assumptions-b-of-a/.).

Others note that, historically, strong year-to-date gains through October have tended to point to further gains for equities in November and December

Among blue chips, shares of Du Pont (DD) were the biggest loser, off 2%. DuPont had gained ground last week after it said it would spin off its performance chemicals unit to existing shareholders.

Fellow Dow component Johnson & Johnson (JNJ) fell 0.9% after the company said it would pay around $2 billion to settle a Justice Department probe into the marketing of antipsychotic drug Riperdal. The company will plead guilty to a misdemeanor, officials said.

Elsewhere, shares of BlackBerry Ltd. (RIMM) fell nearly 17% on news the ailing smartphone maker has abandoned a plan to sell itself. BlackBerry said it would replace Chief Executive Thorsten Heins and receive a $1 billion investment from institutional investors. See: BlackBerry tries to keep the lights on.

Kellogg Co. (K) rose 1.6% after the cereal maker reported earnings and said it would cut its workforce by 7% by the end of 2017.

Steelmakers were also on the rise after analysts at Goldman Sachs upgraded their view on the sector to neutral from cautious and upgraded the shares of individual steelmakers. Goldman lifted AK Steel Holding Corp. (AKS) and United States Steel Corp. (X) to buy from sell and raised Steel Dynamics Inc. (STLD) to buy from neutral. AK Steel shares rose 9.8%, while United States Steel advanced 4.5% and Steel Dynamics gained 2.8%.

Also, Goldman downgraded Reliance Steel & Aluminum Co. (RS) to neutral from buy. Shares rose 0.2%.

In Asia, stocks finished mostly lower, surrendering gains made after upbeat services data from China. European stocks traded higher, while gold edged up and oil prices inched higher.

The dollar was down slightly.

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