US stocks dropped on Monday as traders worried that the Treasury bond market was signalling higher interest rates ahead and energy shares slipped on a drop in crude oil prices.
Selling accelerated in midafternoon as stock indexes fell below key technical levels, traders said.
Oil fell as Opec members indicated the cartel would not cut production at its meeting this week. US crude for April delivery fell $1.62 to $62.05 a barrel.
Shares of Exxon Mobil Corp, the world's largest publicly traded oil company, fell almost 1.3 percent to $60.19 on the New York Stock Exchange, dragging on both the Dow industrials and the S&P 500.
The Dow Jones industrial average was down 79.40 points, or 0.72 percent, at 10,942.19. The Standard & Poor's 500 Index was down 10.08 points, or 0.78 percent, at 1,277.15. The Nasdaq Composite Index was down 18.85 points, or 0.82 percent, at 2,283.75.
"Oil is down today, and the market is down because of interest rates," said Elliot Spar, market strategist with Ryan Beck & Co. In the bond market, the yield on the benchmark 10-year Treasury note rose to 4.722 percent, the highest level since June 2004, as traders braced for the Federal Reserve to lift interest rates higher. Worries about the impact of higher borrowing costs on corporate profits hurt stocks, Spar said.
stock indexes dropped below technical support levels of about 1,283 on the S&P and 2,297 on the Nasdaq, triggering the sharper selling, said Michael Panzner, head of sales trading at Rabo Securities.
On the New York Stock Exchange, decliners outnumbered advancers by a ratio of about 11 to 5. AT&T Inc's announcement that it planned to buy BellSouth Corp for $67 billion boosted telecommunications shares.
BellSouth stock rose 10.3 percent to $34.71 on the NYSE, while AT&T lost 2.4 percent to $27.32, pulling on both the Dow and the S&P 500.
"That's terrific if you're a BellSouth shareholder ... but there are too many negatives poking at the market right now," Spar said.
On the New York Stock Exchange, decliners outnumbered advancers by a ratio of 11 to 5.
Shares of diversified manufacturer 3M Co also weighed on the Dow, falling 1.4 percent to $71.83 after A.G. Edwards cut its investment rating on the company, citing lower growth prospects.
Shares of Research In Motion Ltd, the maker of the popular BlackBerry portable e-mail devices were up 14.2 percent at $82.13 on the Nasdaq after the company announced the settlement of a patent dispute on Friday.
In economic news, pending sales of US homes slipped as the housing market slowed.