- "After last week the market is in a little bit of a digestion phase. Underneath the surface what you're seeing continue is the reflation trade," said Lerner.
NEW YORK: Wall Street's main indexes closed lower on Monday as investors took some profits after last weeks' records while they waited for earnings season to begin and eyed events in Washington with trepidation.
U.S. stocks had rallied last week as investors bet that Democrats' win of Georgia runoff elections would bring a higher likelihood of a heftier fiscal stimulus package to boost the pandemic-savaged economy.
But some investors worried stimulus could be delayed as House Democrats introduced a resolution to impeach U.S. President Donald Trump, accusing him of inciting insurrection following a violent attack on the Capitol by his supporters.
"When markets are looking at something as critical as the governance of the United States, even a little bit of uncertainty can have a meaningful impact," said Brad McMillan, chief investment officer at Commonwealth Financial Network in Waltham, Massachusetts.
"What does that do to the ability of the parties to work together to pass policy things like stimulus."
McMillan said investors also worried about more attacks. The FBI has warned of possible armed protests being planned for Washington, D.C., and at all 50 U.S. state capital cities in the run-up to President-elect Joe Biden's inauguration on Jan. 20, a federal law enforcement source said on Monday.
"Generally speaking, Washington doesn't make too much of a difference but since policy is influencing so much of what's expected around the economy, this is kind of a unique time," said McMillan.
But U.S. Treasury yields rose as safe haven bonds sold off on Monday and economically-sensitive sectors such as energy and financials outperformed while defensive bond proxy sectors like utilities and real estate sold off.
These trades suggested to Keith Lerner, chief market strategist at Truist Advisory Services in Atlanta, Georgia, that investors were still hopeful about stimulus.
"After last week the market is in a little bit of a digestion phase. Underneath the surface what you're seeing continue is the reflation trade," said Lerner.
"This is a continuation of the expectation of more fiscal stimulus."
And along with wariness about Trump's last nine days in office, Lerner cited uncertainty ahead of the unofficial start of earnings season on Friday when banks such as JPMorgan report results.
The Dow Jones Industrial Average fell 89.28 points, or 0.29pc, to 31,008.69, the S&P 500 lost 25.07 points, or 0.66pc, to 3,799.61 and the Nasdaq Composite dropped 165.54 points, or 1.25pc, to 13,036.43.
Among the S&P's 11 major industry indexes, consumer discretionary and communications services were the biggest percentage decliners.
Shares of Twitter Inc tumbled 6.4pc and weighed on the communications sector after the micro-blogging site permanently suspended Trump's account.
But it shares were still more than 160pc higher that where they traded before Trump won the Presidential election in 2016.
Other Big Tech firms Facebook Inc, Alphabet Inc-owned Google and Apple Inc were also weak on Monday as they took their strongest actions yet against Trump to limit his social media reach.
Meanwhile investors were waiting for 2021 guidance on earnings and the economy from the fourth-quarter conference calls from big companies JP Morgan, Citi and Wells Fargo starting on Friday.
Boeing Co shares fell 1.5pc on Monday after a 737-500 jet operated by Indonesia's Sriwijaya Air with 62 people on board crashed on Saturday.
However, shares in Eli Lilly and Co rose 11.7pc, making it the biggest single boost for the S&P 500 after a small trial of its experimental Alzheimer's drug found that it slowed by about a third the rate of decline in a combined measure of cognition and function in patients at an early stage of the disease.
Declining issues outnumbered advancing ones on the NYSE by a 1.53-to-1 ratio; on Nasdaq, a 1.17-to-1 ratio favored decliners.
The S&P 500 posted 49 new 52-week highs and no new lows; the Nasdaq Composite recorded 183 new highs and three new lows.
On U.S. exchanges 14.08 billion shares changed hands on Monday compared with the 11.87 billion average for the last 20 sessions.