U.S. stocks lost ground Monday as investors mulled the impact of a sliding U.S. dollar and a mixed set of earnings reports, with strong results from Caterpillar Inc. but a weaker-than-expected performance from Xerox.
The Dow Jones Industrial Average recently fell 21, to 11327, after ending Friday's session at a six-year high.
The Nasdaq Composite Index dropped 14, to 2329, while the S&P 500 Index was off 5, to 1306.
"I know people are focusing in on the dollar, but if we take a look at last week's strong action, our view at least, is that the underlying economy does not warrant it," said Paul Nolte, director of investments at Hinsdale Associates.
Investors are also somewhat nervous ahead of a number of key economic catalysts later in the week, said Nolte. He said the market would be focusing on the release of the first-quarter gross domestic product report and congressional testimony by Federal Reserve chairman Ben Bernanke.
For Marc Pado, U.S. market strategist at Cantor Fitzgerald, "earnings have been a wonderful distraction" for the stock market, but equity investors will not be able to ignore high energy and commodity costs for much longer.
On the broader market for equities, decliners outpaced advancers by more than 2 to 1 on the New York Stock Exchange, and the Nasdaq.
By sector, semiconductors, brokers, gold stocks and home builders were some of the biggest decliners.
Airlines surged, helped by the pullback in crude-oil prices.
On the currency markets, the Japanese yen surged to nearly a three-month high against the U.S. dollar, after the world's richest countries urged China to enable its currency to strengthen further. The China news helped the yen because it often serves as a proxy for the Chinese currency due to the limited band in which the yuan can trade.
Gold futures were lower in what has been volatile trading for the precious metal over the past three sessions. Gold for June delivery was last down $7 at $628.50 an ounce.
The call for China to revalue its currency came from the G7, the group of seven leading industrialized nations.A top Chinese official reacted to the call by saying the U.S. dollar represents a greater risk to the global economy than the yuan does.
The greenback was last down 1.3% at 115.02 yen. The euro, meanwhile, gained 0.1% to $1.2353.
Crude-oil futures fell in morning trading as some traders locked in gains that pushed the contract to a record above $75 a barrel on Friday. Crude for June delivery was last down 97 cents at $74.20 a barrel.
On the bond market, long-term Treasury prices were little changed. The benchmark 10-year note was up 2/32 at 96 4/32, with its yield at 5%.
Shares of Caterpillar Inc. rose 51 cents to $77.37 after the company reported that first-quarter net income soared a stronger-than-expected 45%. The machinery maker capitalized on higher prices and booming mining and construction markets.
Shares of Xerox Corp. fell 5.5% to $14 after the maker of photocopy machines, printers and fax machines posted quarterly earnings and revenue that fell short of Wall Street expectations.
American Express Co. reported first-quarter earnings in line with expectations as revenue rose 12% to $6.33 billion. The credit card giant was last off 62 cents at $51.63.
On the merger and acquisition front, General Electric Co. is in talks to sell its UK life insurance unit, The Wall Street Journal and the Financial Times reported. GE is in talks to sell the unit to South Africa's Sanlam and could get between 400 million and 500 million pounds ($890 million), the FT report stated. The Journal reported GE might get as much as $1 billion. GE was last off 7 cents at $33.90.
Washington Mutual Inc. said it is buying Commercial Capital Bancorp Inc. for $16 a share, or $983 million, to boost its presence in California and its multifamily housing market. Washington Mutual's stock was off 43 cents at $44.58 while shares of Commercial Capital rallied 11% to $15.70.
Cendant Corp. said it might sell its travel unit. It had earlier said it would spin off the division to holders. Cendant, the operator of Orbitz, CheapTickets.com and Galileo International, said it might sell the unit after receiving a number of unsolicited bids. Cendant shares were up 81 cents at $17.66.
U.S.-listed shares of Deutsche Telekom rose 4.4% to $17.58 after Blackstone Group agreed to buy a 4.5% stake in the telecoms group, owner of the T-Mobile mobile network, from a German state-owned bank for $3.3 billion.