Given the scope of last week's gains, a pullback Monday wasn't unexpected and perhaps reflected the normal ebb-and-flow of trading.

"It's not like all of our problems went away because the market was up a couple of days last week. There are still some problems hanging over," said Tom Higgins, chief economist at Payden & Rygel Investment Management in Los Angeles. He said investors chiefly remained concerned about the labor market — given the huge effect of consumer spending on the economy — and on the feasibility of efforts to aid struggling bond insurers.

The session's move lower continued even after a Commerce Department report showed that orders at U.S. factories rose by 2.3 percent in December — the biggest increase since July. Analysts had been expecting a 2 percent increase after a 1.7 percent gain in November.

While stocks showed little reaction to the factory orders report, Wall Street remains eager for any clues about the nation's economic health. It continued to watch earnings reports trickle in; the readings could help indicate whether Wall Street last week carved the beginnings of a sustainable recovery. Last week, the Dow Jones industrial average jumped 4.39 percent, the Standard & Poor's 500 index gained 3.75 percent, and the Nasdaq composite index advanced 4.87 percent.

Downgrades of credit card companies American Express Co. and Capital One Financial Corp. also weighed on stocks Monday.

According to preliminary calculations, the Dow fell 108.03, or 0.85 percent, to 12,635.16.