The S&P 500 is up nearly 5 percent for the year as an improving U.S. economy and earnings that have largely met expectations have boosted investor optimism. The Dow and S&P 500 both had their best weekly performances in a month last week.

In our view, optimistic sentiment and lightly traded volume are the two key technical concerns that have raised an early warning flag and indicate that the trend should soon flatten, said Ari Wald, equity analyst at Brown Brothers Harriman in New York.

Looking ahead to the coming weeks to months, we would be watchful for a new bull market high that goes unconfirmed by our indicators, or if volume on declining days begins to outpace volume on advancing days. This would be a signal for a more meaningful correction.

The Dow Jones industrial average was down 27.36 points, or 0.22 percent, at 12,693.12. The Standard & Poor's 500 Index was down 1.26 points, or 0.10 percent, at 1,314.12. The Nasdaq Composite Index was down 5.89 points, or 0.21 percent, at 2,780.81.

According to Thomson Reuters data, 15 percent of S&P 500 companies have reported earnings, with 59 percent posting results above Wall Street expectations.

While the percentage of fourth-quarter earnings reports that beat estimates has trailed recent quarters, the rate is expected to improve as earnings season picks up steam. For the week of Jan. 23, 117 S&P 500 companies are expected to report earnings.

Pressuring market sentiment, the euro zone crisis was still lurking in the background. Germany and France pushed for a deal between Greece and its private creditors and said they remained dedicated to a new bailout that is needed by March to stave off a default. Euro zone finance ministers could decide later Monday what debt restructuring terms they would accept.

Halliburton Co shares fell 2.9 percent to $35.14 after the world's second largest oilfield services group warned the deep slump in U.S. natural gas prices could cause near-term disruptions that pinch first-quarter earnings.

Research In Motion Ltd's fell 6.5 percent to $15.89 as analysts were skeptical about the resignation of the BlackBerry maker's co-chief executives.

Sears Holding Corp fell 2.7 percent to $47.75, easing from a session high of $54.76 in what analysts said could be a short squeeze.

The stock is the most shorted stock in the S&P 500, according to Data Explorers, with 94 percent of shares available used to sell short. The retailer has been the best performing stock in the index for the year, up more than 50 percent.

That is a classic short squeeze. There have been headlines all over the name now for the better part of a month or so and it's largely been quite negative, said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.