The tax code agreement reached last Tuesday that raised taxes for individuals earning $400,000 and families earning $450,000 per year or more settled immediate worries about the so-called fiscal cliff, a combined $500 billion tax increase/spending cut adjustment that was would have kicked in Jan. 1 without the new tax law. It was predicted by some to send the U.S. economy into a second recession.
But political leaders didn't deal with the spending side of the budget equation and those decisions, expected to come in March, have the potential to rattle investors.
During the weekend, Senate Minority Leader Mitch McConnell of Kentucky said the discussion on taxes was closed. President Barack Obama had said earlier spending cuts were dependent on further changes in the tax code, MarketWatch reported.
By close of trading, the Dow Jones industrial average lost 50.92 points or 0.38 percent to 13,384.29.
The Nasdaq composite shed 2.84 points or 0.09 percent to 3,098.81.
The Standard and Poor's 500 dropped 4.58 points or 0.31 percent to 1,461.89.
On the New York Stock Exchange, 1,380 stocks advanced and 1,651 declined on a volume of 3.2 billion shares traded.
The 10-year treasury note was yielding 1.902 percent.
Against the dollar, the euro rose to $1.312 from Friday's $1.3069. The dollar was lower at 87.56 yen from 88.16 yen Friday.
In Tokyo, the Nikkei 225 index lost 0.83 percent or 89.10 points to 10,599.01.
In London, the FTSE 100 index lost 0.41 percent, 25.26 points, to 6,064.58.