* Factory orders hint of U.S. economy weakness
* CBOE Volatility index up more than 10 pct as investors
* Spanish and Italian political uncertainty spark concerns
* Indexes off: Dow 0.9 pct; S&P 1 pct; Nasdaq 1.3 pct
By Caroline Valetkevitch
NEW YORK, Feb 4 (Reuters) - U.S. stocks dropped on Monday,
pulling back from gains in the prior session that left the S&P
500 at a five-year high and the Dow above 14,000, as factory
orders data disappointed and worries about the euro zone crisis
The S&P 500 was on track for its biggest daily percentage
decline since Dec. 28. Chevron and Wal-Mart were among the
biggest drags on the Dow after analyst downgrades.
"The market is due for a pullback. That's not really a
surprise. I think people are looking for an excuse to make
sales," said Michael James, senior trader at Wedbush Morgan in
Spanish and Italian bond yields rose, renewing worries about
the euro zone's sovereign debt crisis. Spain's prime minister
faced calls to resign over a corruption scandal, while a probe
of alleged misconduct involving an Italian bank was expected to
widen three weeks before a national election.
Data from the Commerce Department showed overall factory
orders for December were below economists' expectations.
The Dow Jones industrial average was down 120.19
points, or 0.86 percent, at 13,889.60. The Standard & Poor's 500
Index was down 14.65 points, or 0.97 percent, at
1,498.52. The Nasdaq Composite Index was down 40.53
points, or 1.27 percent, at 3,138.57.
The benchmark S&P 500 rose on Friday, leaving it roughly 60
points away from its all-time intraday high of 1,576.09, while
the Dow's march above 14,000 was the highest for the index since
The S&P index is up 5.5 percent for the year, with
nearly half of the gains coming after U.S. legislators
temporarily sidestepped the "fiscal cliff" of automatic tax
increases and spending cuts.
The CBOE Volatility index VIX, Wall Street's
so-called fear gauge, jumped more than 10 percent to 14.48 by
Chevron Corp dipped 0.9 percent to $115.50 after UBS
cut its rating to neutral, while Wal-Mart Stores Inc
shed 1.1 percent to $69.69 after JP Morgan lowered its rating on
the world's largest retailer and reduced its price target.
Shares of household products company Clorox rose 1.3
percent to $80.23 after quarterly profit beat analysts'
estimates as a severe flu season boosted sales of disinfecting
According to Thomson Reuters data, of the 256 companies in
the S&P 500 that have reported earnings through Monday morning,
68.4 percent have reported earnings above analyst expectations
compared with the 62 percent average since 1994 and the 65
percent average over the past four quarters.
S&P 500 fourth-quarter earnings are expected to rise 4.4
percent, according to the data. That estimate is above the 1.9
percent forecast at the start of earnings season, but well below
the 9.9 percent fourth-quarter earnings forecast on Oct. 1.
Herbalife Ltd slumped 2.5 percent to $34.16 after
the New York Post newspaper reported the seller of weight loss
products is facing a probe by the Federal Trade Commission.