NEW YORK (Reuters) - Stocks fell on Monday as banks agreed to pay billions in a settlement with U.S. regulators and investors speculated that U.S. earnings for the end of 2012 would be only modestly better than in the previous quarter.
Financials declined after a group of home mortgage servicers, including major U.S. banks, agreed to pay a total of $8.5 billion to end a government-ordered, case-by-case review of foreclosures.
The KBW bank index <.bkx>, a gauge of U.S. bank stocks, was down 0.7 percent.
Earnings are expected to be only slightly better than the third-quarter's lackluster results, and analysts' current estimates are down sharply from what they were in October.
"There is little doubt that concerns about the fiscal cliff created spending hesitancy in both consumers and businesses in the fourth quarter, and it is likely that will adversely impact earnings season," said Randy Frederick, managing director of active trading and derivatives at Charles Schwab.
Aluminum company Alcoa Inc will unofficially launch the reporting season by announcing its results after Tuesday's market close.
The Dow Jones industrial average <.dji> was down 77.33 points, or 0.58 percent, at 13,357.88. The Standard & Poor's 500 Index <.spx> was down 8.69 points, or 0.59 percent, at 1,457.78. The Nasdaq Composite Index <.ixic> was down 12.39 points, or 0.40 percent, at 3,089.26.
The day's decline came a session after the S&P 500 finished at a five-year high and investors booked profits on stocks' best weekly gain in more than a year, boosted by a budget deal and economic data. The S&P 500 rose 4.6 percent last week.
Ten mortgage servicers - including Bank of America
Bank of America also announced roughly $11.6 billion of settlements with mortgage finance company Fannie Mae and a $1.8 billion sale of collection rights on home loans.
The bank also entered into agreements with Nationstar Mortgage Holdings
Bank of America shares were down 0.6 percent at $12.04 while Nationstar Mortgage Holdings
JPMorgan shares were down 0.4 percent at $45.16 and Citigroup shares were down 0.8 percent to $42.07. Wells Fargo shares fell 1.1 percent to $34.55.
Walt Disney Co
Video-streaming service Netflix Inc
Amazon.com shares hit their highest price ever at $269.22 after Morgan Stanley raised its rating on the stock. Shares were up 3.3 percent at $267.77.
Major U.S. technology companies could miss estimates for fourth-quarter earnings as budget worries likely led some corporate clients to tighten their belts last month.
(Reporting By Angela Moon; Editing by Kenneth Barry)