Stocks set for rough open

NEW YORK (CNNMoney.com) -- U.S. stocks were set for a lower start Monday, as investors expressed caution after pushing Wall Street to 18-month highs.

Dow Jones industrial average, S&P 500 and Nasdaq 100 futures were lower ahead of the opening bell.

Futures measure current index values against perceived future performance and offer an indication of how markets may open when trading begins.

Wall Street may be set for a volatile week as investors mull recent gains that have lifted the Nasdaq and S&P 500 to their highest level in 18 months.

"Once we've reached these levels, investors get cautious," said Derek Hoffman, chief executive and founder of Wall St. Cheat Sheet. "Fundamentals still aren't showing a fully recovering picture, so to continue to roil higher and higher doesn't really align with the economic reality, and at this juncture we typically see pullbacks."

The Federal Reserve's decision on interest rates, due Tuesday, will help to dictate the direction of the market for the remainder of the week, said Hoffman.

"The day before the report is put out, a lot of investors will be waiting and anticipating every word that comes out from the Fed," he said. "If there are any unexpected changes, that will result in more volatility in the market throughout the week."

Since bottoming at a 6-year low on March 9 of last year, the Nasdaq has gained 87%. Since bottoming at a 12-year low on the same day, the S&P 500 has gained 70% and the Dow has gained 62%.

Economy: Investors lost confidence Monday after Moody's Investor Services said the United States is closer to losing its AAA credit rating, said Hoffman.

"It caused fear in the markets because this is something that everyone has been talking about," he said. "This is a sign that the likelihood that [Moody's] could put something out downgrading AAA rated countries that are experiencing troubles is a high possibility."

Investors will take in a reading on factory output ahead of the opening bell. A survey on manufacturing in New York state is also on tap.

Companies: Google (GOOG, Fortune 500) is in the spotlight Monday following news reports saying that the search giant is moving closer to shutting its Web site in China.

Back in January, Google said it may leave China and shut its site there, Google.cn, citing censorship rules and a targeted cyber attack on its network infrastructure.

Google shares were nearly 2% lower in pre-market trading.

Troubled insurer AIG (AIG, Fortune 500) said Monday it would retain $21 million in bonus payments to former employees. AIG is also slated to pay out $46 million to current and former employees of the Financial Products division on Monday.

AIG shares gained 3% in premarket trading.

Philips-Van Heusen (PVH), the owner of Calvin Klein, reached a deal to buy Tommy Hilfiger for about $3 billion in cash and stock.

Financial reform: Senate Banking chief Christopher Dodd, D-Conn., is expected to release a draft bill of financial rules aimed at preventing future financial crises.

World markets: European markets got off to a lower start. In morning trading, Britain's FTSE 100, the CAC 40 in France and Germany's DAX all posted modest losses.

Asian shares finished mostly lower. The Hang Seng in Hong Kong lost 0.6%. Japan's benchmark Nikkei index barely ended above breakeven.

Dollar, oil, Treasurys: The dollar was higher against the euro, yen and British pound. Crude prices for April delivery drifted lower, declining 48 cents to $80.76 a barrel.

Meanwhile, safe-haven Treasurys were mostly higher with the benchmark 10-year yield at 3.69%. Yields and prices move in opposite direction. Investors often seek out the perceived safety of Treasurys in times of economic uncertainty because they are backed by the U.S. government.