A broad sell-off handed the US stock market its biggest loss in more than four months on Monday, pulling the major indexes below their recent record highs.
Technology stocks, the biggest gainers in 2017, accounted for much of the slide. Energy companies also fell as crude oil prices finished lower.
Utilities and other rate-sensitive sectors declined as bond yields hit their highest level in almost four years.
Investors weighed the latest company earnings and deal news, including Keurig’s acquisition of Dr Pepper Snapple for $16.6 billion, including debt, and looked ahead to a busy week of corporate news and economic data.
The pullback followed a big rally on Friday, which gave the stock market its biggest single-day gain since March last year.
“It may just be we’ve had a really good run and people are taking profit off the table right now,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab.
The Standard & Poor’s 500 index fell 19.34 points, or 0.7%, to 2,853.53, the Dow Jones industrial average slid 177.23 points, or 0.7%, to 26,439.48, the Nasdaq composite lost 39.27 points, or 0.5%, to 7,466.51, and the Russell 2000 index of smaller-company stocks gave up 9.95 points, or 0.6%, to 1,598.11.
Falling stocks outnumbered rising ones almost five-to-one on the New York Stock Exchange.
Bond prices fell. The yield on the 10-year Treasury note rose to 2.70%, the highest in almost four years, from 2.66% late on Friday.
The prospect for stronger economic growth, both in the US and abroad, has helped drive bond yields higher. As bond yields rise it puts pressure on yield-sensitive sectors: real estate investment trusts, telecoms and utilities.
The three sectors finished more than 1% lower on Monday and are in the red for the year.
Investors face a busy week of potential market-moving corporate news and economic data the rest of this week. Several big-name companies are due to report quarterly results on Wednesday and Thursday, including Apple, Amazon, Microsoft, Facebook and Google’s parent company Alphabet.
“Combined, that’s 14.3% of the entire S&P 500 index in five companies- $3.6 trillion in market cap – so this is a very important week,” said Mike Baele, senior portfolio manager at US Bank Private Wealth Management.
About a quarter of the companies in the S&P 500 have reported results so far this earnings season, and 65% of those have delivered results that exceeded analysts’ expectations, according to S&P Global Market Intelligence.
On Monday, Lockheed Martin added 1.9% after the defence contractor reported better-than-expected quarterly results. The stock rose $6.52 to $351.42.
Apple fell 2.1% amid growing investor worries that the iPhone X has not been a hit with customers.
Shares in the technology giant have been declining for several days, erasing billions of the company’s market capitalisation. The stock shed $3.55 to $167.96.
Apple is scheduled to report its earnings on Thursday.
Beyond earnings, the market will be sizing up new data on US jobs, manufacturing and consumer sentiment this week.
The Commerce Department said consumer spending rose 0.4% in December, a solid though slower pace than in November.
Traders welcomed a crop of corporate deals on Monday.
Dr Pepper Snapple Group vaulted 22.4% after it agreed to be acquired by Keurig for $16.6 billion, including debt.
The deal would create a beverage giant with about $11 billion in annual sales and a stable of brands including Dr Pepper, 7UP, Snapple, A&W, Mott’s, Sunkist and Keurig’s single-serve coffee makers.
Dr Pepper Snapple added $21.42 to $117.07.
KapStone Paper and Packaging Corp soared 30.8% after it agreed to be bought by rival WestRock for $35 a share, or $3.39 billion. KapStone shares gained $8.17 to $34.71. WestRock slid $1.86, or 2.6%, to $68.41.
Benchmark US crude fell 58 cents, or about 1%, to settle at $65.56 a barrel on the New York Mercantile Exchange.
Brent crude, used to price international oils, dropped $1.06, or 1.5%, to close at $69.46 per barrel.
Gold, which hit an 18-month high last week, fell $11.80 to $1,340.30 an ounce, silver dropped 31 cents, or 1.8%, to $17.13 an ounce, and copper slipped 1 cent to $3.19 a pound.
The dollar, which fell sharply last week, rose to 108.94 yen from 108.66 late on Friday. The euro fell to $1.2389 from $1.2423.
The price of bitcoin fell 4.2% on Monday to $11,207, according to the tracking site CoinDesk. Bitcoin futures on the Cboe Futures Exchange rose 2.1% to $11,170.
In other futures trading, wholesale petrol was little changed at $1.9 a gallon, heating oil slid 3 cents to $2.11 a gallon, and natural gas rose 13 cents, or 3.6%, to $3.63 per 1,000 cubic feet.