The S&P 500 index fell 29 points, or 1.1 per cent, to 2,635. Nvidia plunged 14 percent after slashing its revenue forecast. The yuan appreciated to its strongest against the dollar since July before Vice Premier Liu He travels to Washington for trade talks, and as the People's Bank of China freed up a potential $37 billion for bank lending.
Investors will also grapple with trade negotiations, amid a report Monday that USA prosecutors are planning to file criminal charges related to China's largest smartphone maker.
In Asia Pacific, which accounts for about 22 per cent of Caterpillar revenues, the company is hoping for growth outside China as construction equipment sales in the world's second largest economy are expected to be flat this year. "But right now, these micros, which are company specific issues, is what investors seem to be dealing with", said Wiegand.
"With Caterpillar blaming China, investors are expecting to see more companies do the same in through the week", said Peter Cardillo, chief market economist at Spartan Capital Securities in NY. The company notched $386 million in expenses tied to firing employees and closing down factories in 2018, down from $1.26 billion the year before and about $1 billion in 2016.
Investors will also grapple with trade negotiations, a Federal Reserve policy decision and there will be another series of potentially key votes in the U.K. Parliament about Brexit.
USA stock index futures dipped on Monday, as weak forecast from Caterpillar added to nerves about Chinese economy, while optimism over the end to the longest US government shutdown in history faded.
At 12:44 p.m. ET the Dow Jones Industrial Average .DJI was down 338.08 points, or 1.37%, at 24,399.12, the S&P 500 was down 31.94 points, or 1.20%, at 2,632.82 and the Nasdaq Composite was down 103.65 points, or 1.45%, at 7,061.21.
USA charges Chinese telecom giant Huawei with fraud, stealing trade secrets
The company is also charged with violating US sanctions on Iran and conspiring to obstruct justice related to the investigation. US prosecutors charge that Huawei used a Hong Kong shell company to sell equipment in Iran in violation of USA sanctions.
Equity markets have solid underpinnings with fourth-quarter earnings looking good, a likely truce in the U.S. It reported a 43 percent drop in operating profit for the quarter through last month.
"But the complication of volatility being uncomfortable and the fact we're later in the (business) cycle, that's why we're seeing these larger reactions to market news than we're used to", she said.
US crude production, which rose to a record 11.9 million barrels per day late a year ago, has undermined sentiment in the oil market, traders said.
Crude oil prices tumbled 3% overnight on rising concerns of a demand slowdown from China and evidence of increasing U.S. oil output, which inhibits the oil market from reaching a supply-demand balance. It hit a near two-week low at 95.673 earlier in the session.
The dollar slipped to 109.36 Japanese yen from 109.64 yen late Friday.
Caterpillar is paying more for materials, and has said that it would raise prices between 1 percent and 4 percent this year on engines and machines to counter rising costs. But the dramatic increase in profits was boosted by recovering from a hit in 2017 from restructuring costs, pension expenses and the impact of United States tax reform.