Stocks Start Year in Retreat

"Considering that the year was plagued by weakness in housing, a credit crisis, crude prices rising 57.4% and a dollar down 8.2%, and given the war in Iraq and the negative rhetoric with Iran, I would have to say that the performance, while not measuring up to the historical norm for a pre-election year, should be viewed as having been pretty resilient in the face of adversity," he said.

In corporate news, several ratings changes were making headlines. Among upgrades, Citigroup raised its rating for Amazon.com (AMZN Quote) to buy from hold. Shares advanced $3.61, or 3.9%, to $96.25.

On the downside, Banc of America Securities downgraded several semiconductor names, including Intel, Advanced Micro Devices (AMD Quote), Texas Instruments (TXN Quote) and National Semiconductor (NSM Quote).

The Philadelphia Semiconductor Sector Index lost 2.8%.

Meanwhile, Bear Stearns cut Starbucks (SBUX Quote) to peer perform from outperform, JPMorgan Chase reduced its rating for FedEx (FDX Quote) to neutral from overweight, and CIBC downgraded UnitedHealth (UNH Quote) to sector perform from sector outperform.

Starbucks fell 5.7% to close at $19.31, FedEx slumped 3.4% to $86.16, and UnitedHealth ended down 2.6% at $56.67.

Markets overseas lost ground. Hong Kong's Hang Seng fell 0.9% overnight. Among European bourses, London's FTSE 100 fell 0.6%, and Germany's Xetra Dax slid 1.5%.