Updated from 4:09 p.m. EST

Stocks fell hard Monday, led to the downside by the tech sector, as traders took a wait-and-see stance heading in to the busiest part of earnings season.

The Dow Jones Industrial Average was off 88.37 points, or 0.7%, at 12,477.16, bringing the index close to the unchanged mark for the year. The S&P 500 was down 7.55 points, or 0.53%, at 1422.95. The Nasdaq Composite was lower by 20.24 points, or 0.83%, at 2431.07.

"There's a lot of nervousness over earnings and the interest rate environment," said Jay Suskind, head of institutional equity trading with Ryan Beck & Co. "January hasn't been a great month so far. We're in the heart of the earnings calendar, and we're seeing people taking their profits."

On the Dow, Boeing ( BA) slid 3.4% after Wachovia downgraded the airplane maker to market-perform from outperform.

Meanwhile, losses of 1.9% or more in Apple ( AAPL), Dell ( DELL) and XM Satellite Radio ( XMSR) dragged the Nasdaq lower.

Roughly 2.30 billion shares changed hands on the New York Stock Exchange. Decliners beat advancers by a 5-to-3 margin. Volume on the Nasdaq topped 1.96 billion shares, with losers outpacing winners 2 to 1.

Marc Pado, U.S. market strategist with Cantor Fitzgerald, said earnings will be at the forefront of investors' minds as the week unfolds.

"Even when the earnings have been better than expected, the forward-looking statements have left something to be desired," he said. "These earnings are not only necessary to justify the current market at record highs, but the corporate outlook is setting the tone for the first quarter."

Aside from earnings, the market also has been closely following oil prices, which have been sliding since the beginning of the year. In the latest Nymex trading session, energy prices jumped as high as $53.44 before giving back gains.

The February crude contract, trading for the last time, lost 86 cents at $51.13 a barrel. Natural gas, meanwhile, surged 43 cents to close at $7.32 per million British thermal units.

On Friday, the Nasdaq broke a three-day string of losses and closed higher, but a selloff in IBM ( IBM) led to a decline for the Dow. The Dow slipped 2.40 points, or 0.02%, to 12,565.53, while the Nasdaq rose 8.10 points, or 0.33%, to 2451.31.

As a new week got started, the crush of earnings was under way. One of those reporting was drug giant Pfizer ( PFE), whose fourth-quarter earnings fell to $1.49 billion, or 21 cents a share, from continuing operations, down from $2.6 billion, or 35 cents a share, last year.

Pfizer's sales rose slightly to $12.6 billion from $12.55 billion a year earlier. Excluding certain costs, latest-quarter earnings were 43 cents a share, a penny better than estimates. The company also announced the elimination of 10,000 jobs, a move that is expected to yield savings of $1.5 billion to $2 billion by the end of 2008. Pfizer shed 27 cents, or 1%, to $26.95.

Fellow Dow component American Express posted a fourth-quarter profit of $922 million, or 75 cents a share, up 24% from a year ago. Revenue jumped 13% to $7.2 billion. However, analysts expected the credit card giant to earn 76 cents on $7.33 billion of revenue. The stock dipped 3 cents, or 0.1%, at $58.06.

Elsewhere, Eaton ( ETN) posted a fourth-quarter profit of $241 million, or $1.59 a share, rising from $210 million, or $1.38 a share, a year ago. Excluding items, the industrial manufacturer earned $1.66 a share, beating the Thomson First Call average estimate of $1.59 a share. However, quarterly revenue missed estimates, and the company forecast flat sales in 2007. Shares fell $3.85, or 5%, to $73.80.

Movie Gallery ( MOVI) reported a third-quarter loss of $36.1 million, or $1.13 a share, widened from a loss of $12.5 million, or 39 cents a share in the year-ago quarter. Analysts expected a loss of 44 cents a share. Movie Gallery tacked on 12 cents, or 4%, to end at $3.14.

Chipmaker Texas Instruments ( TXN) is expected to post fourth-quarter earnings after the close. Wall Street expects a profit of 38 cents a share, according to Thomson First Call.

In M&A activity, Citigroup ( C) will purchase ABN Amro's ( ABN) mortgage group, including $9 billion in net assets and a $224 billion mortgage servicing portfolio. Terms were not disclosed.

Citigroup, which also announced that Chief Financial Officer Sallie Krawcheck will become chairman of its global wealth-management division, gained 0.3%. ABN Amro sank 1.5%.

Elsewhere, State Street ( STT) agreed to acquire closely held foreign-exchange trading platform Currenex for $564 million in cash. Shares of State Street fell 94 cents, or 1.3%, to close at $70.60.

Treasuries rose. The 10-year note was up 5/32 in price to yield 4.76%, and the 30-year bond was gaining 8/32 to yield 4.85%.

Among commodities, gold relinquished early gains and closed down $2.30 to $634.10 an ounce. Silver was stronger by 8 cents at $13 an ounce.

Overseas, the London FTSE 100 was down 0.3% at 6218, and the Frankfurt Xetra DAX was off 0.9% to 6687. Asia's stocks rose. Tokyo's Nikkei was up 0.7% at 17,424, and Hong Kong's Hang Seng advanced 0.9% to 5727.

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