The Dow and the S&P 500 fell in volatile trading on Monday as a strong earnings-driven rally from last week lost steam, with losses in economy-sensitive sectors being countered by gains in shares of Boeing and Tesla.
The S&P 500 and the Nasdaq posted their biggest monthly percentage gains since 2020 in July on stronger-than-expected second-quarter results and on hopes the Federal Reserve need not to be as aggressive with interest rate hikes as some had feared.
"The market was a little bit on edge, it's just trying to find its way right now. A lot of people are trying to understand have we seen the bottom and are we going to move higher from here," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
Offering support to the Dow and S&P 500, Boeing Co gained 5.4% after a Reuters report the U.S. aviation regulator approved the planemaker's inspection and modification plan to resume deliveries of 787 Dreamliners.
Meanwhile, data showed U.S. manufacturing activity slowed-less-than-expected in July and there were signs that supply constraints are easing.
The report came on the heels of surveys which showed factories across Asia and Europe struggled for momentum in July as flagging global demand and China's strict COVID-19 curbs slowed production.
That dragged oil prices lower on demand concerns, which in turn weighed on the S&P 500 energy sector. The index fell 2.8% and was the top loser among the 11 sectors.
The factory activity data will be followed by the monthly U.S. jobs report on Friday, which will be parsed for cues for the Fed's next moves.
The U.S. central bank has raised interest rates by 2.25 percentage points so far this year and has vowed to be data-driven in its approach toward future hikes.
Worries about a recession have weighed on stock markets this year, with the benchmark index down 13.4% as investors adjust their expectations on economic growth and corporate profits in the face of tightening financial conditions.
However, the earnings season has showed companies were far more resilient in the second quarter than estimated.
Of the 283 S&P 500 companies that have reported results, 78.1% have topped profit estimates, as per Refinitiv data. The long-term average is 66.1%.
Activision Blizzard, Devon Energy and Simon Property Group are scheduled to report quarterly results later in the day.
At 10:40 a.m. ET, the Dow Jones Industrial Average was down 39.30 points, or 0.12%, at 32,805.83, the S&P 500 was down 5.72 points, or 0.14%, at 4,124.57.
The Nasdaq Composite was up 34.19 points, or 0.28%, at 12,424.88, boosted by 2.7% rise in shares of Tesla Inc
PerkinElmer Inc jumped 9% after the medical diagnostic firm said it will sell some of its businesses along with the brand name to private equity firm New Mountain Capital for up to $2.45 billion in cash.
Declining issues outnumbered advancers for a 1.50-to-1 ratio on the NYSE and for a 1.47-to-1 ratio on the Nasdaq.
The S&P index recorded two new 52-week highs and 31 new lows, while the Nasdaq recorded 31 new highs and 70 new lows.
(Reporting by Aniruddha Ghosh, Devik Jain and Bansari Mayur Kamdar in Bengaluru)