NEW YORK, Feb. 4 (Xinhua) -- U.S. stocks on Monday logged the biggest one-day drop so far in 2013 as investors took a breath from a five-week winning streak.
The major indices wrapped up the previous week with another more-than-five-year high, with the Dow Jones Industrial Average closing above the important psychological level of 14,000 for the first time since October 2007.
But the market traded on a cautious note on Monday, as many traders believed the equity market was overbought and should have a little bit pullback and consolidation before a new leg of gains.
By the closing bell, the Dow sank 129.71 points, or 0.93 percent, to 13,880.08. The S&P 500 plunged 17.46 points, or 1.15 percent, to 1,495.71, and the Nasdaq Composite index slid 47.93 points, or 1.51 percent, to 3,131.17.
The eurozone debt crisis came back into market focus after 10-year bond yields in Spain and Italy shot up on Monday due to political jitters in the two countries.
Spanish Prime Minister Mariano Rajoy was called to resign after he and his Popular Party were accused of accepting illegal payments, while former Italian Prime Minister Silvio Berlusconi gained in the polls ahead of the election despite the tax fraud scandal.
The rise of borrowing cost in Spain and Italy reflected concerns among bond investors that the two countries may be unable to meet their financial obligations.
Investors were also watching the European Central Bank's interest rate announcement later this week.
On the economic front, lower-than-expected data on factory orders weighed down the market.
The Commerce Department said Monday that U.S. factory orders rose 1.8 percent in December from the previous month, lower than analysts' expectation of a 2.4-percent increase.
Meanwhile, the November reading was revised down to a 0.3-percent drop compared to the initial 0 percent. Orders for durable goods rose 4.3 percent in December, while those for nondurable goods declined 0.3 percent, the department said.
With the earnings season winding down and the clock ticking toward the deadline of the U.S. government's automatic spending cuts on March 1, the market is again under pressure from the looming "debt ceiling" and the bipartisan wrangling in Washington over the issue.
The sequestration would total some 110 billion U.S. dollars per year in defense and non-defense discretionary spending from 2013 to 2022, unless politicians can come to some agreement in February.
For individual companies, shares of McGraw-Hill, owner of Standard & Poor's Ratings Services, dropped 13.78 percent to 50.30 U.S. dollars per share as McGraw-Hill confirmed that U.S. Department of Justice plans for a CDO-ratings (Collateralized Debt Obligation-ratings) civil suit.
Shares of Acme Packet, a communication equipment provider, surged 23.65 percent to 29.59 dollars after the networking company was acquired by Oracle for 29.25 dollars per share, which represents a 22.2-percent premium to Acme's Friday closing price.
On other markets, crude prices retreated from a four-month high as the U.S. crude benchmark faces mounting correction pressure after gaining for eight straight weeks.
During the eight-week period, U.S. crude jumped 14 percent, while the Brent crude added 9 percent on more signs of growth in the United States and China, the world's top two oil consumers.
Light, sweet crude for March delivery lost 1.60 dollars, or 1.64 percent, to settle at 96.17 dollars a barrel on the New York Mercantile Exchange. Brent crude for March delivery also slipped 1.16 dollars, or 0.99 percent, to close at 115.60 dollars a barrel.
The U.S. dollar snapped a four-day losing streak versus the euro after reaching a 14-month low.
The U.S. Federal Reserve's decision to keep ultra-loose monetary policies last week as well as political uncertainties in Spain and Italy resulted in the weakening of the dollar.
In late New York trading, the euro fell to 1.3519 dollars from 1.3664 dollars of the previous session and the British pound climbed to 1.5764 dollars from 1.5719 dollars.
The dollar edged up to 0.9083 Swiss francs from 0.9076 and went up to 0.9980 Canadian dollars from 0.9970. The dollar bought 92.42 Japanese yen, lower than 92.74 in the previous session.