The US bourse is set to open higher as European leaders get ready to meet.

New York - US stocks fell by mid-morning on Monday, quickly erasing earlier gains, as weaker-than-expected new home sales data and ongoing concerns about emerging markets weighed on investor sentiment.

The technology sector was the biggest loser with the Nasdaq falling more than 1 percent.

The Dow industrial average was outperforming the broader market thanks to Caterpillar Inc which reported better-than-expected results.

“Earnings gave investors hope but the reality of all the moving parts of emerging markets and weak home sales made them rethink how good results from a handful of companies really are,” said Kim Forrest, analyst at Fort Pitt Capital Group Inc.

Investors were also cautious ahead of the Federal Reserve's two-day policy meeting that begins on Tuesday.

Many market participants expect another selloff if the Fed decides to keep withdrawing its stimulus, further pressuring equities already roiled by a flight from emerging markets last week.

Big technology names like Google Inc and Microsoft weighed on the market.

Google shares were off 2.3 percent at $1,098.38. Microsoft shares lost 1 percent to $36.42.

The Dow Jones industrial average rose 24.4 points or 0.15 percent, to 15,903.51, the S&P 500 lost 3.41 points or 0.19 percent, to 1,786.88 and the Nasdaq Composite dropped 34.687 points or 0.84 percent, to 4,093.486.

The day's decline followed a steep selloff last week, raising concerns that the market may be in for a major correction.

The S&P 500 fell 2.6 percent for the week, closing below its 50-day moving average for the first time since October 9, suggesting more selling may be ahead for the market that closed out 2013 with a 30-percent gain.

Caterpillar shares jumped more than 5 percent to $90.61 after posting stronger-than-expected quarterly profit.

The world's largest mining and construction equipment company aggressively cut costs to offset continued sluggish sales of its mining equipment.

Analysts expect overall fourth-quarter earnings should grow by 6.2 percent year-on-year, said Jonathan Golub, chief US market strategist at RBC Capital Markets LLC in New York.

“However, if beats were to continue at the current pace of 2.5 percent, earnings growth should approximate 7.8 percent.”

Apple Inc is due to report earnings after the close of trading.

The iPhone and iPad maker may notch its most successful holiday shopping season yet, setting records for sales of its gift-friendly iPhones and iPads.

It will, however, continue to draw investor scrutiny over sales in ultra-competitive China, its No. 2 market but a drag on revenue and margins in recent quarters.

In economic news, sales of new US single-family homes fell more than expected in December, but lean inventories and steady price gains suggested sufficient strength in the housing market to support the economy.

US mobile group AT&T has ruled out a bid for Britain's Vodafone for now, with banking sources saying a US spying scandal and a surge in European telecom shares may have disrupted a deal that many think could still happen.

US-listed shares of Vodafone fell 2.5 percent to $37.09. - Reuters