Banks, retailers and communications companies took the brunt of the selling. Those losses were partially offset by gains in health care and household goods makers. Utilities and real estate stocks also rose, as traders shifted funds into less risky assets.
The modest slide cut into some of the market's gains from Friday, when the benchmark S&P 500 hit an all-time high.
Traders are expecting that the Federal Reserve will announce on Wednesday that it is cutting interest rates for the first time in a decade to help ensure U.S. economic growth in the face of trade uncertainty.
Investors will also be wading through the heaviest slate of the current corporate earnings reporting season this week. And they'll be keeping an eye on trade negotiations between the U.S. and China, which resume Tuesday, and on a key government jobs report due out Friday.
"This is a marking time sort of day with earnings coming up, with the Fed coming up, with the economic data coming up later this week," said Willie Delwiche, investment strategist at Baird. "If anything, you have a modest reaction to the all-time highs that we saw on Friday and a chance to take profits, but not much conviction either way."
The S&P 500 index slipped 4.89 points, or 0.2%, to 3,020.97. The Dow Jones Industrial Average rose 28.90 points, or 0.1%, to 27,221.35.
The Nasdaq composite fell 36.88 points, or 0.4%, to 8,293.33. The Russell 2000 index of smaller companies slid 9.94, or 0.6%, to 1,569.02.
Slightly more stocks rose than declined on the New York Stock Exchange. Major stock indexes in Europe closed mostly lower.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.06% from 2.08% late Friday.
Despite Monday's selling, the market's record run at the end of last week kept the broader market on track for another month of gains. The S&P 500 is up 2.7% in July and the Nasdaq is up 3.6%.
Even with a busy week of corporate earnings on deck this week, Wall Street will be focused mainly on the outcome of the Fed's meeting of policymakers.
The market expects the central bank will cut its benchmark short-term rate on Wednesday to help ensure U.S. economic growth in the face of trade uncertainty. Investors are expecting the Fed will cut its rate by a quarter of a percentage point from its current range of 2.25% to 2.50%. That would be the Fed's first rate cut in a decade.
Wall Street is betting that a Fed rate cut would give the economy, and stock prices, a boost. But that depends more on whether the Fed drops any hints about how inclined it might be to cut rates multiple times this year.
"Do they talk about this as a cut and look for another cut, or is there a cut and this is going to be it?" Delwiche said. "The market is expecting somewhere around three cuts over the course of the second half (of 2019). It seems to me the Fed is going to want to start pushing back against that expectation. How it achieves that could be the driver for stocks in the near-term."
Financial stocks accounted for a big share of the selling Monday. Raymond James Financial slid 3.5% and Wells Fargo & Co. dropped 2.1%. The sector fell as bond yields dropped, which pulls interest rates on mortgages and other loans lower.
Retailers and other consumer-oriented companies also weighed on the market, with Amazon sliding 1.6% and discount chain Dollar Tree losing 2.1%. Facebook dropped 1.9% and Dish Network fell 3.1% as part of a broad slump in communications stocks.
Gains in health care companies partly offset some of those losses. The sector was mostly propped up by pharmaceutical companies ahead of some key earnings. Some corporate deal news involving health companies also helped boost the sector.
Pfizer slid 3.8% after the drug company said it will spin off one of its units, Upjohn, which will then combine with Mylan, which makes generic pharmaceuticals. Upjohn sells one-time blockbusters like Viagra and Lipitor that have lost patent protection. Mylan soared 12.6%.
Cancer diagnostics company Exact Sciences recovered most of an early slide, shedding 0.3%, after announcing a cash and stock buyout of diagnostic test maker Genomic Health, which rose 6.4%.
Cooper Tire & Rubber's latest quarterly report card helped put traders in a selling mood. The stock tumbled 9.6% after the company's results fell far short of Wall Street's forecasts because of a weak tire market in China and Europe. Higher tariff costs and a lingering weak tire market will continue to hurt the company in 2019 and it no longer expects volume growth.
Booz Allen Hamilton rose 3.4% after the defense contractor's fiscal first quarter profit and revenue beat analysts' estimates.
Companies are just about halfway done with corporate earnings season and the slowdown in profit growth isn't as severe as analysts initially forecast. Among the big companies due to serve up their results this week are Apple on Tuesday and General Motors on Thursday.
Trade also remains on investors' radar. The U.S. and China head into another round of trade negotiations on Tuesday. Wall Street is hoping the nations can avoid another escalation in tariffs like the one that occurred two months ago after talks fell apart.
Investors are also awaiting the government's monthly jobs report for July, which will be released on Friday.
Benchmark crude oil rose 67 cents to settle at $56.87 a barrel. Brent crude oil, the international standard, gained 25 cents to close at $63.71 a barrel. Wholesale gasoline fell 1 cent to $1.86 per gallon. Heating oil declined 1 cent to $1.91 per gallon. Natural gas fell 3 cents to $2.14 per 1,000 cubic feet.
Gold rose $1.13 to $1,419.60 per ounce, silver rose 4 cents to $16.37 per ounce and copper rose 1 cent to $2.69 per pound.
The dollar rose to 108.80 Japanese yen from 108.71 yen on Friday. The euro strengthened to $1.1146 from $1.1126.