U.S. stocks fell Monday morning, backing off a rally that had pushed the Standard & Poor's 500 index above 1,500 for the first time since December 2007. The modest decline occurred despite of encouraging signs about the manufacturing sector, a key driver of economic growth.
The government said before trading began that orders for long-lasting goods rose in December by 4.6 percent, helped by a 10 percent gain in orders for new aircraft.
Heavy equipment maker Caterpillar said separately that its fourth-quarter net income exceeded analysts' expectations, after adjusting for the cost of a soured deal to buy a Chinese maker of roofing supports for mines. Caterpillar said it took a big charge in the quarter because the Chinese company had misrepresented its finances.
Caterpillar Inc. said it expects growth in China to improve without regaining the levels seen in 2010 or 2011. The stock was the biggest gainer in the Dow Jones industrial average, rising $1.21, or 1.3 percent, to $96.79 as of 10:15 a.m. Eastern time.
Stocks opened mixed after Caterpillar's announcement and the factory orders data, but turned negative in the first half-hour of trading. Declining stocks outnumbered rising stocks by more than two to one on the New York Stock Exchange.
The Dow fell 25 points to 13,870. The S&P 500 dropped six to 1,497. The Nasdaq composite average declined three to 3,146.
Among companies in the S&P 500 that reported earnings Monday, Biogen Idec Inc. said its fourth-quarter net income slipped nearly 3 percent because of a tax charge and higher expenses. Still, the biotech drug maker was one of the top gainers in the S&P 500, rising $4.40, or 3 percent, to $150.60.
Roper Industries Inc., which makes medical and industrial equipment, said its fourth-quarter net income rose 18 percent. But the company issued mixed guidance for the current quarter and full year 2013. It rose 9 cents to $118.92.
Strong corporate earnings have pushed stocks higher in the past two weeks after several calm, relatively news-free weeks. On Friday, the S&P 500 closed above 1,500 for the first time since December 2007, the official start of the worst economic downturn since the 1930s.
In addition to strong earnings, traders have been encouraged by signals that housing market is improving steadily and hiring is picking up, albeit slowly.
There will plenty of fresh data to drive trading this week, including retail sales, economic growth and the government's report on hiring and employment in January, which is due out Friday. More than one-fifth of the companies in the S&P 500 will report fourth-quarter earnings this week.
The yield in the benchmark 10-year Treasury note rose to 1.98 percent from 1.95 percent late Friday, reflecting lower demand for ultra-safe investments. After Monday's factory orders report, the yield rose briefly above 2 percent for the first time since April. A bond's yield rises as demand for it decreases.
Daniel Wagner can be reached at www.twitter.com/wagnerreports .