* Instability worries follow Greek election outcome
* Rock-Tenn and MeadWestvaco rally, set to merge
* Indexes down: Dow 0.5 pct, S&P 0.4 pct, Nasdaq 0.4 pct (Updates to open of U.S. trading)
By Ryan Vlastelica
NEW YORK, Jan 26 (Reuters) - U.S. stocks fell on Monday after a decisive Greek election victory by the Syriza party spurred concern over fresh instability in the euro zone, even as the possibility of Greece leaving the bloc was considered remote.
The leftist Syriza party looked set to take on Greece’s international lenders, with leader Alexis Tsipras pledging to end five years of austerity and renegotiate Greece’s debt agreements. Investors were concerned that potential conflicts with other euro zone governments could put more strain on the currency bloc.
While Greece is a relatively small economy to which the United States has limited direct exposure, extended volatility in the region could hurt multinational companies. If the euro continues to weaken against the dollar, that could be a headwind for earnings.
“The ongoing display of angst is that Greece removes itself from the euro-zone. It’s the unknown about things breaking up,” said Frank Davis, director of sales and trading at LEK Securities in New York. “We consider that a remote possibility, but it makes sense for us to take a pause and reassess our fundamentals.”
European shares were volatile after the election, falling as much as 0.4 percent before rising by 0.5 percent. They last traded up 0.2 percent. U.S.-listed shares of the National Bank of Greece fell 10 percent to $1.51 in heavy trading.
The German government said a third debt restructuring was out of the question for Greece, though it opened the door to a possible extension of the country’s current bailout program.
In deal news, Rock-Tenn Co and MeadWestvaco Corp said they would combine to form a packaging company worth $16 billion, with MeadWestvaco shareholders owning a majority stake. Rock-Tenn rose 9.1 percent to $68.55 while MeadWestvaco rose 16 percent to $52.16.
D.R. Horton Inc rose 4.5 percent to $24.13 after the homebuilder’s revenue growth beat expectations, boosted by home deliveries.
With 19 percent of S&P 500 companies having reported earnings, 71.6 percent have topped expectations, while 54.7 percent have beaten revenue forecasts, according to Thomson Reuters data. That compares with the long-term average of 63 percent for earnings and 61 percent for revenue.
Ocwen Financial Corp jumped 15 percent to $7.36 after the company paid $2.5 million in penalties to the California Department of Business Oversight, which had threatened to suspend Ocwen’s license to operate in the state. About 1.5 million shares exchanged hands, making the stock the New York Stock Exchange’s most active mover.
At 9:44 a.m. (1444 GMT) the Dow Jones industrial average fell 82.81 points, or 0.47 percent, to 17,589.79, the S&P 500 lost 8.97 points, or 0.44 percent, to 2,042.85 and the Nasdaq Composite dropped 18.40 points, or 0.39 percent, to 4,739.48.
Declining issues outnumbered advancing ones on the NYSE by 1,691 to 1,064, for a 1.59-to-1 ratio; on the Nasdaq, 1,414 issues fell and 854 advanced, for a 1.66-to-1 ratio .
The S&P 500 was posting 13 new 52-week highs and 6 new lows; the Nasdaq Composite was recording 25 new highs and 17 new lows. (Editing by Bernadette Baum and Nick Zieminski)