The Dow Jones industrial average fell 0.4%, the S&P 500 slid 0.6% and the Nasdaq declined 1%.
Investors were sidelined ahead of the Federal Reserve, which could announce new stimulus measures when it wraps up its two-day meeting on Thursday.
Friday's weak jobs report prompted further speculation that the central bank will move forward with a third round of quantitative easing, a possibility Fed chairman Ben Bernanke alluded to in a speech last month.
But investors were more circumspect Monday about whether the Fed will act this week, or hold off until later in the year, said Todd Salamone, senior vice president of research at Schaffer's Investment Research.
"Some are expecting QE3 to happen, but they're unsure of the timing," he said.
Meanwhile, investors will be keeping tabs on Europe, as the German Constitutional Court is expected to hand down a ruling Wednesday that could impact the European Central Bank's plans to preserve the euro.
The European Central Bank announced its own bond-buying program last week, aimed at keeping the continent's debt crisis at bay.
Investors are also awaiting details on the European Union's proposal to create a new banking authority, general elections in The Netherlands and a meeting of euro area finance ministers later this week.
"The market is digesting last week's gains with a multitude of events ahead of us," said Art Hogan, a managing director at Lazard Capital Markets.
U.S. stocks closed out their best week since June last week.
Currencies and commodities:
The dollar gained strength against the euro, the British pound and the Japanese yen.
Oil for October delivery fell 12 cents to settle at $96.54 a barrel.
Gold futures for December delivery fell $8.70 to end at $1,731.80 an ounce.
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