U.S. stocks finished lower on Monday following last week's big rally, as investors trimmed positions caused by troubled financial sectors which suffered from several broker downgrades.
The Dow Jones Industrial Average was down 108 points at 12,635, with 23 of its 30 component stocks in red territory. Blue-chip American Express Co. lost 3.9 percent after UBS downgraded the stock to sell from buy. The bank also cut its ratings on Discovery Financial and Capital One Financial to sell from hold.
The downgrades reflected the company's forecast for a consumer-led recession in the first six months of 2008, which would weigh on the credit card issuers.
The S&P 500 index lost 14 points to 1,380, while the Nasdaq Composite ended 30 points down at 2,382.
Meanwhile, Merrill Lynch downgraded Wachovia and Wells Fargo to sell, according to Briefing.com. Stifel Nicolaus also downgraded Wells Fargo.
Washington Mutual and Countrywide Financial both dropped on news of the downgrades as investors grew concerned they would be next.
Technology shares also gave back some of the strong gains seen Friday, when they received a boost from news that Microsoft Corp. bid $44.6 billion for internet search-engine giant Yahoo
Last week the Dow gained 4.4 percent and the S&P 500 jumped 4.9 percent. The Nasdaq rose 3.8 percent.
Stocks rallied at the end of last week, after a miserable January, as investors welcomed Microsoft's bid for Yahoo and more talk of a bailout for the troubled bond insurers. Yahoo shares gained another 3.3 percent, while Microsoft lost 0.8 percent. On Monday, Microsoft CEO Steve Ballmer continued to promote the deal, saying it would make his company a strong No. 2 competitor to Google.
In currency trading, the dollar gained slightly against the Japanese yen, adding 0.2 percent to 106.71 yen, but edged lower against the euro.
U.S. light crude oil for March delivery advanced $1.06 to settle at $90.02 a barrel on the New York Mercantile Exchange. Oil was boosted by a temporary closure of a key waterway in Texas.
COMEX gold for April delivery dropped $4.10 to $909.40 an ounce.
Asia markets rallied Monday in Shanghai after the Chinese market regulator approved the launch of two new stock funds. Meanwhile, European stocks also closed slightly higher