The Dow Jones industrial average (^DJI) was down 136 points, or 0.9 percent, at 14,936. The Standard & Poor's 500 (^GPSC) index dropped 14 points, or 0.9 percent, to 1,676. The Nasdaq (^IXIC) composite fell 37 points, or 1 percent, to 3,770.
Two stocks fell for every one that rose on the New York Stock Exchange. Volume was much lighter than usual at 2.6 billion shares.
Senate Democrats moved to introduce legislation to raise the nation's debt limit without the unrelated conditions Republicans have said they are seeking, officials said. The White House signaled it would accept even a brief extension in borrowing authority to prevent an unprecedented default by the United States.
Lawmakers have until Oct. 17 to reach a deal on increasing the nation's debt ceiling. Failure to strike a deal could cause the United States to miss payments on its debt. The Treasury warned last week that a default could push the economy into a downturn even worse than the Great Recession.
Until now, the stock market has mostly moved sideways since the shutdown began at the start of the month, indicating that investors still expect lawmakers to come up with a deal. The S&P 500 is flat in October.
Some investors see the current stall in stock markets as a blip rather than a change in the long-term trend. The Federal Reserve continues to keep up its unprecedented stimulus of the economy, a strategy that has helped support a four-year surge in stocks.
The stock market climbed to record levels in September after the Fed said it would keep buying $85 billion of bonds a month to support the U.S. economy. Many investors had expected the central bank to start reducing its stimulus.
Minutes from the September meeting will be published Wednesday, giving investors an insight into the central bank's thinking.
Investors will also be keeping an eye on earnings reports this week. Companies start releasing financial results for the third quarter. S&P 500 companies are projected to report slowing earnings growth for the fourth straight quarter, according to data from S&P Capital IQ.
In commodities trading, the price of benchmark U.S. oil dropped 74 cents to $103.10 a barrel as crude production in the Gulf of Mexico got back on track after a storm system passed through. The price of gold rose $12.20 to $1,321.90 an ounce.
More Stocks in the News:
- Cooper Tire & Rubber (CTB) slumped $3.76, or 12.7 percent, to $25.76 after the company filed a complaint in a Delaware court on Friday asking that the India company buying it quickly close on the deal. Investors are taking the news as a sign that the deal is in jeopardy.
- Japan Airlines signed its first-ever purchase from Airbus, a deal for 31 A350 jets worth $9 billion at the planes' list price. The deal was a blow to Boeing (BA), which saw its stock lose 51 cents, or 0.4 percent, to $116.69.
- Mattel (MAT) slipped $1.41 cents, or 3.3 percent, to $41.14 after a Goldman Sachs (GS) analyst cut his earnings estimates for the toy maker. The investment bank also cut its estimates for Hasbro (HAS), which fell 79 cents, or 1.7 percent, to $46.64. Goldman is predicting a tough holiday season for the toy makers as children favor video games.
- Apple (AAPL) rose $4.91, or 1 percent, to $487.94 after a Jefferies analyst raised his rating and price target on the stock, saying improving margins should help the business until the launch of the iPhone 6.
- Food recycling company Darling International (DAR) is buying a unit of Vion Holding NV for about 1.6 billion euros ($2.17 billion). Vion Ingredients, based in the Netherlands, produces specialty ingredients from animal origin for applications in pharmaceuticals, food, feed, pet food, fertilizer and bio-energy. Its brands include Rendac, Sonac, Ecoson, Rousselot, CTH and Best Hides. Darling gained 47 cents, or 2.3 percent, to $20.80 on the news.
What to Watch Tuesday: