In the lightest volume session of the year, stocks fell after a lowered outlook from Kimberly-Clark heightened concerns about higher commodity costs squeezing profits in coming quarters.
About 5.34 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below the daily average of 7.74 billion.
The threat of rising commodity costs will remain in the spotlight for one of the busiest weeks of earnings, with 180 S&P 500 companies scheduled to report this week, including other major consumer names like Procter & Gamble
That is going to be the next thing that happens -- the forward guidance is going to start to become impacted because of higher prices, said Ken Polcari, managing director of ICAP Equities in New York.
This non-existent inflation that (the Federal Reserve) keeps talking about is elusive, because there clearly is much more inflation than they care to admit at the moment.
Kimberly-Clark, maker of Kleenex tissue and Huggies disposable diapers, is among companies highly vulnerable to rising commodity costs because its products contain oil-based materials and paper.
The Dow Jones industrial average <.DJI> dropped 26.11 points, or 0.21 percent, to 12,479.88. The Standard & Poor's 500 Index <.SPX> shed 2.13 points, or 0.16 percent, to 1,335.25. The Nasdaq Composite Index <.IXIC> gained 5.72 points, or 0.20 percent, to 2,825.88.
Johnson Controls Inc
Through Monday, 75 percent of the 151 companies in the S&P 500 that have reported results have beaten analysts' expectations. That is just above the average over the past four quarters but well above the average of 62 percent since 1994, according to Thomson Reuters data.
The Nasdaq edged higher, boosted by SanDisk Corp
But energy and materials companies' shares ranked among the worst performers, with the PHLX oil service sector index <.OSX> off 0.9 percent and the S&P Materials Index <.GSPM> down 0.7 percent. Oil prices slipped in thin, choppy trade as a sell-off in silver from near record highs lifted the dollar off its lows, prompting a bout of profit taking in crude.
The CBOE Volatility Index <.VIX> rose 7.4 percent after falling last week to its lowest level since 2007.
This week is another hectic one for earnings, including Amazon.com
Energy companies' earnings are featured this week, Polcari pointed out.
They are all projected to be better because of high oil prices and all that stuff -- great for them, but not good for anyone else, Polcari added.
The week's agenda includes a two-day meeting of the U.S. Federal Reserve's policymaking committee on Tuesday and Wednesday. Fed Chairman Ben Bernanke will hold the first of four annual press conferences on Wednesday after the Federal Open Market Committee's meeting ends.
Investors will look for clues about the direction of monetary policy when the Fed's bond buying program ends in June.
Declining stocks outnumbered advancing ones on the NYSE by 1,640 to 1,379, while on the Nasdaq, decliners beat advancers by 1,401 to 1,185.
(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)