NEW YORK (AFP) - US stocks closed lower Monday amid profit taking from last week's rally and caution on the eve of the start of corporate earnings season.

The Dow Jones Industrial Average shed 50.92 points (0.38 per cent) at 13,384.29.

The broad-based S&P 500 fell 4.58 points (0.31 per cent) to 1,461.89, while the tech-heavy Nasdaq Composite edged down 2.84 (0.09 per cent) to 3,098.81.

Stocks gave back some of their gains from last week "amid some cautious afternoon trading preceding tomorrow's unofficial commencement of 4Q earnings season by Dow member Alcoa Inc's report after the closing bell," Charles Schwab & Co. analysts said.

Bank of America shares slipped 0.2 per cent after it announced a comprehensive US$11.6 billion (S$14.3 billion) deal to settle longstanding claims on soured mortgages with Fannie Mae, as well as the sale of servicing rights on $306 billion worth of mortgages.

Bank of America will pay Fannie Mae US$3.6 billion in cash and another US$6.75 billion to repurchase often dodgy mortgage loans it sold to the government-controlled Fannie Mae.

It will also pay another US$1.3 billion to settle additional Fannie claims on the servicing of mortgages.

Nationstar Mortgage, one of the buyers of the servicing rights, soared 16.9 per cent.

US regulators separately announced that 10 banks, including Bank of America, will pay US$8.5 billion in cash and other assistance to borrowers hurt by their "deficient" practices.

Others included in that agreement were JPMorgan Chase and Citigroup, both up 0.1 per cent.

On the Nasdaq, Apple fell 0.6 per cent after announcing its App Store had a record-setting December, with two billion copies of mini-programmes snatched up.

Online retail giant Amazon surged 3.6 per cent after gaining an upgrade to "overweight" from Morgan Stanley.

Netflix, being challenged by Amazon in online video streaming, added 3.4 per cent after it announced a deal to buy content from Warner Brothers Television.

Gene sequencing firm Illumina lost 7.1 per cent after Roche Holding's chairman scotched expectations of a Roche takeover in an interview.

Bond prices were essentially flat, with the yield on the 10-year US Treasury steady at 1.91 per cent from late Friday and the 30-year edging down to 3.10 per cent from 3.11 per cent. Bond prices and yields move inversely.