Wall Street drops after Caterpillar forecast, German data

Traders work on the floor of the New York Stock Exchange, September 20, 2012.

NEW YORK (Reuters) - U.S. stocks edged lower on Monday as a disappointing forecast from Caterpillar (CAT.N) and weak German data increased concerns that global growth may remain sluggish.

Minutes before the close, Caterpillar cut its earnings forecast for 2015, citing weakness in the world economy. Its stock fell 0.9 percent to $90.87 and was the top drag on the Dow. After the bell, Caterpillar's stock lost another 2.1 percent to $88.99.

An index of German business sentiment declined for a fifth consecutive month in September, showing Europe's strongest economy was moving closer toward recession as the euro zone's debt crisis remains unresolved.

Concerns about a stalling global economy also were reflected in energy and technology shares, with the S&P energy index .GSPE down 0.5 percent and the S&P 500 technology index .GSPT down 0.8 percent.

But the S&P 500 is on track for a 7.6 percent gain for the quarter. Analysts said investors are probably now participating in "window dressing," where fund managers add some of the latest outperformers to their portfolio.

"Hedge funds remain somewhat short the market, and the end of the quarter is coming up, so I wouldn't be surprised to see equity markets push a bit higher over the near term," said Michael Sheldon, chief market strategist of RDM Financial, in Westport, Connecticut.

The gains have largely been tied to central bank stimulus plans. On September 6, the European Central Bank announced its bond-buying plan; a week later, the Federal Reserve unveiled a third round of quantitative easing intended to bolster the economy and reduce U.S. unemployment.

The Dow Jones industrial average .DJI declined 20.55 points, or 0.15 percent, to close at 13,558.92. The Standard & Poor's 500 Index .SPX shed 3.26 points, or 0.22 percent, to 1,456.89. The Nasdaq Composite Index .IXIC dropped 19.18 points, or 0.60 percent, to end at 3,160.78.

Dragging down the Nasdaq, Apple Inc (AAPL.O) fell 1.3 percent to $690.79 even as its latest iPhone sold out. Concerns arose that the company was unable to produce the new phone quickly enough to meet demand.

Among other high-profile tech decliners, Facebook (FB.O) shares dropped 9.1 percent to $20.79. It was the Nasdaq's most actively traded stock.

In contrast, shares of Google Inc (GOOG.O), the world's No. 1 search engine, climbed to a record high of $750.04 as analysts said its solid advertising business and its revenue make the company look more attractive compared with once-hot newcomers to the social media scene. Google's stock closed at $749.38, up 2.1 percent.

In the energy sector, the PHLX oil service sector index .OSX shed 1.4 percent, while U.S. crude oil declined 1 percent to settle at $91.93. Worries about global demand pushed crude prices down more than 6 percent last week. <O/R>

For the third quarter so far, the energy sector has performed well, however, with the S&P energy index .GSPE up 10.6 percent so far.

Shares of home builder Lennar Corp (LEN.N) fell 1.5 percent to $36.96 despite reporting steep increases in its third-quarter earnings and revenue.

Lennar's results follow a similarly strong report from KB Home (KBH.N) last week, and together give further evidence the housing market is moving toward recovery.

The PHLX housing index .HGX is up 61.1 percent for the year so far.

"What we're watching is the stocks in the sector recover from a very depressed base from a couple of years ago," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.

Among the largest decliners on Monday was Peregrine Pharmaceuticals Inc (PPHM.O), which plunged 78.5 percent to $1.16 after the company said it found major discrepancies in results from a mid-stage study of its experimental lung cancer drug conducted by a third-party contractor.

Volume was lower than average, with roughly 5.54 billion shares traded on the New York Stock Exchange, the Nasdaq and the Amex, compared with the year-to-date average daily closing volume of 6.54 billion.

Decliners outnumbered advancers on the NYSE by about 3 to 2, and on the Nasdaq, about seven stocks fell for every six that rose.

(Additional reporting by Chuck Mikolajczak; Editing by Jan Paschal)