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Stocks Slump Before Earnings Season Begins

NEW YORK ( TheStreet) -- Major U.S. stock averages slumped after a run-up Friday in which the S&P 500 rose to a new closing high.

Investors paused before the start of the earnings season. Excitement over the "fiscal cliff" deal has faded with the next leg of the battle over the country's financial future about to begin.

The Dow Jones Industrial Average shed 51 points, or 0.38%, to 13,384.

Breadth was negative, with losers outnumbering winners 18 to 12. The most prominent blue-chip decliners by percentages were Walt Disney ( DIS), Travelers ( TRV), Boeing ( BA) and Alcoa (AA).

Bank of America (BAC) shares slipped 0.25%. The bank announced that it has reached a $10 billion settlement with Fannie Mae to resolve agency mortgage repurchase claims on loans originated and sold directly to Fannie Mae through Dec. 31, 2008.

Nationstar Mortgage (NSM - Get Report) shares surged by 16.9% after the company announced it is buying about $215 billion in mortgage servicing assets from Bank of America.

Advancers included Verizon (VZ), McDonald's ( MCD) and AT&T (T).

The S&P 500 was down 5 points, or 0.31%, at 1,462. The Nasdaq lost 3 points, or 0.09%, to 3,099.

Apple (AAPL - Get Report) shares fell 0.54% after Barclays cut its share price target.

All sectors, except health care, sank, led lower by consumer cyclicals, energy and utilities.

Volumes were at 3.27 billion shares on the New York Stock Exchange and 1.69 billion shares on the Nasdaq. Decliners were outpacing advancers 1.2-to-1 on the Big Board and 1.3-to-1 on the Nasdaq.

"With the beginning of earnings season this week, investors will be looking closely at company commentary in light of the recent fiscal cliff crisis and the upcoming debt ceiling fight," said Mike Simmons, managing director and partner at HighTower's Simmons Wilkes Investment Advisors. "The debt ceiling debate will be one of the major determinants of market performance in coming weeks."

Earnings season unofficially begins with Alcoa's (AA) fourth-quarter earnings report on Tuesday.

No major U.S. economic data releases were expected on Monday.

On Friday, major U.S. stock averages ticked higher after upbeat December jobs and services-sector growth reports.

The U.S. macro calendar will be relatively light this week. However, Federal Reserve officials are expected to make a number of speeches. Bank of America economists expect the doves to reiterate a need for additional accommodation amid a subpar recovery.

Rocky White, senior quantitative analyst at Schaeffer's Investment Research, said to pay attention to how the market performs this month because January is a good indicator for the calendar year.

"If the Dow is up 3.5% or more in January, the rest of the year averages a gain of 11.15%," said White. "If the Dow loses at least 3.5% in January, it averages a gain of just 0.32%."

Gold for February delivery dipped $2.60 to settle at $1,646.30 an ounce at the Comex division of the New York Mercantile Exchange, while February crude oil contracts added 10 cents to close at $93.19 a barrel.

The benchmark 10-year Treasury was down 1/32 to raise the yield to 1.906%. The dollar lost 0.34%, according to the U.S. dollar index.

In more corporate news, Illumina ( ILMN ) shares slid 7.1% after Swiss pharmaceutical giant Roche suggested that it's no longer interested in bidding for the U.S. gene-sequencing company.

Chipmaker Nvidia (NVDA) unveiled a handheld game console on Sunday at the Consumer Electronics Show in Las Vegas.

Nvidia didn't disclose pricing details or a release date for the "Project Shield" device, which plays Android games. Shares slipped 2.9%.

Paul Jacobs, CEO of wireless chipmaker Qualcomm (QCOM), delivers the keynote address at the 2013 CES convention on Monday night.

Qualcomm also is expected to unveil new products for its line of modems and application processors used in smartphones and tablets. Shares were up 0.8%.

Steel company Commercial Metals ( CMC ) reported adjusted quarterly earnings of 15 cents a share on sales of $1.8 billion, versus the average analyst estimate of earnings of 17 cents a share on revenue of $1.9 billion. The company's Americas Recycling segment recorded a lower adjusted operating profit compared to the prior year's first quarter as lower demand hurt ferrous and nonferrous pricing and volumes.

The company warned that its second fiscal quarter is normally its weakest period of the year because of holiday slowdowns and winter weather curtailing construction activity, but that growing evidence of an emerging recovery in domestic construction end markets is encouraging for future quarters. Shares popped 3.1%.

Applied Materials ( AMAT) shares were off 1.2% after the stock was downgraded to "underweight" from "neutral" at JPMorgan, which continues to have a bearish outlook on capital expenditures by semiconductor manufacturers.

CombiMatrix ( CBMX) shares soared 15.2% after the molecular diagnostics company announced that it expects to report record volumes of prenatal testing in the fourth quarter and for the year.

-- Written by Andrea Tse and Joe Deaux in New York.

>To contact the writer of this article, click here: Andrea Tse.

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