Stocks started the week with a thud Monday, with the Dow and S&P 500 logging their first four-day losing streaks this year, as investors looked ahead for clues on the Federal Reserve's plans on bond purchases and amid rising Treasury yields.
"All of last week, people were trying to make the story match the market move," said Art Hogan, managing director at Lazard Capital. "If the pullback last week was due to tapering worries, then I think we may have overdone it. I was more concerned about the actual negative news—weak guidance from Cisco and earnings misses from Macy's, Wal-Mart and Kohl's."
The Dow Jones Industrial Average declined 70 points to close just above the psychologically-important 15,000 level, dragged by JPMorgan and Alcoa. Last week, the index suffered its worst weekly decline of 2013, shedding 2.2 percent.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, jumped above 15.
Most key S&P sectors fell into negative territory, led by energy and financials.
"The movement in the market is a bit exaggerated when volume is light and that's going to be the case over the next couple of weeks," said Hogan. "We don't have much this week but we do have a real concentration of information on Wednesday and Thursday including the Fed's meeting minutes…until we get some news in terms of what tapering is going to look like, we may be sideways this week."
With no major economic data on tap Monday, trading was light as investors looked ahead to the minutes of the last Fed meeting, which will be released on Wednesday, for clues as to when the central bank will start scaling back its $85 billion per month stimulus program.
In Asia, China's benchmark index, the Shanghai Composite, climbed 0.8 percent as sentiment recovered, following last week's trading error at Everbright Securities. Plus, the Japanese Nikkei reversed earlier losses after posting a wider-than-expected monthly trade deficit, which cast some doubt on Prime Minister Shinzo Abe's aggressive economic policies.
(Read more:That 6% rally in China? Blame a trading goof)
On the earnings front, Saks posted a winder-than-expected quarterly loss after weak sales of shoes and handbags caused the department store chain to mark down prices. Saks became the latest retailer to post lackluster sales. Last week, Macy's, Nordstrom, Kohl's and Wal-Martall posted lower-than-expected sales. In July, Saks reached a deal to be acquired by Canada's Hudson's Bay.
JPMorgan Chase declined following weekend reports that U.S. authorities have opened a bribery investigation into whether the bank hired the children of Chinese officials to help it win lucrative business.
In the bond markets, yields on 10-year benchmark Treasurys briefly touched 2.90 percent, the highest since July 2011 amid Fed tapering concerns. So far this month, U.S. bond mutual funds and ETFs have seen outflows of $19.7 billion, according to TrimTabs.
"Heavy bond fund redemptions and the backup in bond yields should concern all investors, not just bond investors, because the U.S. economy is a highly leveraged economy that will not easily tolerate higher borrowing costs," TrimTabs CEO David Santschi said in a report.
Brent crude oil rose above $110 a barrel as the loss of Libyan oil exports tightened supply and as ongoing violent unrest in Egypt stoked fears for exports from other oil producers in the Middle East and North Africa.
Oil prices are likely to drift higher this week, CNBC's weekly sentiment survey showed. However, price gains may be limited, as analysts said the uptick in political instability in Egypt had already been priced in.
"There is still too much oil," said Thomas McMahon, director of the Pan Asia Clearing Enterprise and former chief executive officer of the Singapore Mercantile Exchange. "But cheap dollars, technical disconnect and Egypt seems to be sweeping this aside. Common sense and supply demand will prevail but maybe not this week."