A strengthening dollar and worries about an overheated market pounded stocks.
Stock indexes started higher Monday but turned sharply lower at midmorning as a rebound in the value of the dollar stalled a rally in commodities. Early gains in prices for oil and other commodities had pushed up shares of energy and materials companies.
The sharp swings in currency and commodities markets sent the Dow Jones industrial average whipsawing in a 200-point range, surrendering an early advance for a loss of 104 points. Stocks have fallen in four of the last five days.
"This is the tug-of-war that's been going on for a while now," said Samuel Dedio, portfolio manager of the Artio U.S. Smallcap Fund in New York, referring to sparring between the dollar and stocks.
Oil gave up early gains to settle down $1.82 at $78.68 per barrel on the New York Mercantile Exchange. That hurt the shares of major oil companies such as ConocoPhillips.
Changes in the dollar's value against other currencies frequently send commodities prices up or down. Since most commodities are priced in dollars they become more attractive to investors outside the U.S. when the dollar is weak, and more expensive when the dollar is strong.
Analysts also said some investors are looking to pocket gains after a stock market run that has stretched nearly eight months and brought share prices to their highest levels in a year.
"I'm not sure that you need to have a good reason to see a reversal like this other than too much too fast," said Harry Rady, chief executive of Rady Asset Management in San Diego, referring to the market's rise from 12-year lows in early March.
Technology shares fared better than other parts of the market Monday after Marvell Technology Group Ltd., which makes chips used in phone networks, raised its fiscal third-quarter revenue forecast. That helped the technology-focused Nasdaq composite index limit its losses. RadioShack Corp.'s third-quarter sales topped expectations, helping some retailers.
Richard Ross, global technical strategist at Auerbach Grayson in New York, said the direction of the dollar as well as volatility continues to drive stock trading. "You're seeing this sort of waltz between the dollar and volatility and stocks," Ross said.
The Dow fell 104.22, or 1.1 percent, to 9,867.96. The index fell 109 Friday. The slide is the first consecutive triple-digit loss for the Dow since June 15-16.
The broader Standard & Poor's 500 index fell 12.65, or 1.2 percent, to 1,066.95. The index, which is the basis for many mutual funds, is down 2.8 percent from its recent peak a week ago.
The Nasdaq fell 12.62, or 0.6 percent, to 2,141.85.
About three stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5.7 billion shares compared with 4.8 billion Friday.
Stocks fell Friday after a rise in the dollar hurt commodity prices. The Dow lost 0.2 percent last week, while the S&P 500 index fell 0.7 percent.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.56 percent from 3.49 percent late Friday. It was the first time since late August that the yield topped 3.50 percent.
The dollar rose against most other major currencies, while gold fell.
Financial stocks posted some of the biggest losses as an analyst lowered his ratings on some regional banks and as traders worried about what might happen if regulators try to impose rules on the size of financial institutions.
"We're seeing legislation in Washington drive trading," said John Brady, senior vice president of global interest rate products at MF Global in Chicago.
Meanwhile, Rochdale Securities bank analyst Richard Bove lowered his ratings on Fifth Third Bancorp, SunTrust Banks Inc. and US Bancorp. Fifth Third fell 82 cents, or 7.9 percent, to $9.52 and SunTrust slid $1.14, or 5.4 percent, to $19.85. US Bancorp fell 80 cents, or 3.2 percent, to $24.15.
Homebuilder stocks fell as investors tried to determine whether Congress will extend a tax credit for first-time homebuyers. Top Democrats in the Senate pushed for a plan that would continue the credit but phase it out over the next year.
An analyst also cut his estimates on several companies in the industry while warning that most companies won't eke out a small profit until late 2011.
Pulte Homes Inc. fell 38 cents, or 3.8 percent, to $9.70, while Hovnanian Enterprises Inc. slid 23 cents, or 5.4 percent, to $4.07.
Among oil companies, ConocoPhillips sank $1.23, or 2.4 percent, to $50.74.
In other trading, Marvell rose 41 cents, or 2.8 percent, to $14.99, while RadioShack rose $2.49, or 15.9 percent, to $18.15.
The Russell 2000 index of smaller companies fell 7.18, or 1.2 percent, to 593.68.
Overseas markets fell after U.S. stocks dropped. Britain's FTSE 100 fell 1 percent, Germany's DAX index and France's CAC-40 each fell 1.7 percent. Japan's Nikkei stock average rose 0.8 percent.