NEW YORK — U.S. stocks fell sharply Monday, the first trading day after the Dow hit its highest level since the financial crisis.
The Dow Jones industrial average dropped as much as 123 points in morning trading. It was down 112 points at 13,898 as of 10:50 a.m. Eastern time.
The Standard & Poor's 500 index dropped 11 points to 1,502. The Nasdaq composite index fell 18 to 3,161.
The declines followed a surge Friday that pushed the Dow over 14,000 for the first time since 2007, before the financial meltdown that routed world markets.
Friday was only the tenth time in its history that the Dow closed above 14,000. The first was in July 2007; the rest were in October of that year. The index closed Friday just 155 points shy of its record high, set that October.
The rally was powered by solid economic data, including a January jobs report that showed the labor is market strengthening gradually. A broad measure of manufacturing also rose sharply.
The Dow is up 6 percent this year. Yet Wall Street's celebratory mood was a distant memory Monday, as U.S. stocks followed European markets lower. France's CAC-40 was down 2.1 percent, Germany's DAX 1.7 percent.
"It started to look like things in the market are maybe getting a little ahead of themselves, compared to some of the data we've seen," said Bill Stone, chief investment strategist at PNC Asset Management Group. He said problems in Europe are also beginning to affect U.S. markets after several quiet months.
Borrowing costs for Italy and Spain rose Monday, Stone noted, reflecting concerns among bond investors that those countries may be unable to meet their financial obligations.
"It kind of restarts some of the old worries that we've been able to ignore for quite some time," Stone said.
In New York, energy and health care stocks led the declines. Merck & Co. was among the Dow's biggest losers, dropping 74 cents, or 1.8 percent, to $41.09. The pharmaceutical company said Friday that its earnings declined in the fourth quarter and 2013 might be weaker than analysts had hoped.
Only two of the 30 stocks in the Dow rose, both of them tech companies: Cisco Systems and Hewlett-Packard Co.
Corporate earnings reports continue this week. Health insurer Humana leapt $3.85, or 5 percent, to 79.20 after its results beat Wall Street's forecasts.
Cruise operator Royal Caribbean fell after reporting a quarterly loss related to its Spanish cruise line, Pullmantur. Prices and bookings have plunged since the Spanish government imposed strict austerity measures, limiting Spaniards' ability to spend. Royal Caribbean shares dropped 74 cents, or 2 percent, to $36.05.
Among other companies making big moves was network gear maker Acme Packet Inc., which surged $5.37, or 22 percent, to $29.30 after Oracle said it would acquire the company for $2.1 billion.
In Europe, political jitters about Spain and Italy pushed stocks lower. Some indexes were having their worst day in months.
Concerns over Europe's debt crisis have eased since last summer, in part because of efforts by the Spanish and Italian governments to get their finances under control.
An upcoming election in Italy places some of those reforms in doubt. The Spanish government, meanwhile, is embroiled in a corruption scandal that's raising questions over the future of Prime Minister Mariano Rajoy.
The euro was trading 0.5 percent lower at $1.3571. The yield on the 10-year Treasury note fell to 1.99 percent from 2.05 percent earlier Monday as demand for ultra-safe assets increased.
Oil prices drifted lower. Crude fell $1.19 to $96.58 a barrel in New York.