Other indexes also closed lower. The Standard & Poor's 500 index lost 5.50 points, or 0.4 percent, to 1,374.53. The Nasdaq composite index fell 20.37 points, or 0.7 percent, to 2,883.89.
Investors are trading against the backdrop of the "fiscal cliff," a set of U.S. government spending cuts and tax increases that will take effect automatically at the beginning of next year unless U.S. leaders reach a compromise before then.
Worries about the fiscal cliff pushed U.S. stocks to one of their worst weekly losses of the year last week after voters re-elected President Barack Obama and a deeply divided Congress. Obama met Tuesday with labor leaders and others who advocate higher taxes on the wealthy and want to protect health benefits for seniors and other government programs. Obama will meet with business leaders Wednesday.
"The longer we sit and do nothing" about the nation's fiscal issues, "the more this market is going to oscillate between positive 40 and negative 60, until we know what's going to happen next with all this uncertainty," said Craig Johnson, senior technical research strategist with Piper Jaffray & Co. in Minneapolis.
Johnson expects the S&P 500 will reach 1,550 in the next six months as investors get over their lingering wooziness from the Great Recession and companies understand better how government policy on taxes, health care and spending will affect them.
European stocks had been lower but rose after trading opened in New York. Benchmark indexes in France, Britain and Germany closed modestly higher.
Traders in Europe are concerned because finance ministers postponed $40 billion in desperately needed aid for Greece. The news surprised investors. A day earlier, there was word that leaders had prepared a "positive" report on Greece, making it appear likely that the aid would be released.
"It's a little bit like Groundhog Day," said Nicholas Colas, chief market strategist at ConvergEx Group, referring to the classic Bill Murray movie whose protagonist must relive the same day over and over. Until there is decisive news from Washington or Brussels, neither of which appears imminent, markets will remain vulnerable to short-term swings caused by headlines, Colas said.
The next major catalysts for a market move, Colas said, will be gauges of spending by consumers on Black Friday, the traditional shopping rush on the day after Thanksgiving.
Greece's neighbors decided to give the country two more years to meet its economic targets. They still disagree with the International Monetary Fund, another key lender, over how to manage the country's debt over the long term. Until lenders reach an accord, they can't release the billions that Greece needs to make upcoming payments.
IMF managing director Christine Lagarde said Greece should reduce its debt burden down to 120 percent of its economic output by 2020, the original target of 2020. But Jean-Claude Juncker, leader of the euro zone's finance ministers, said that the deadline would likely be changed to 2022. The lenders will meet again on Nov. 20.
The yield on the 10-year Treasury note slid to 1.59 percent from 1.64 percent late Friday as demand increased for ultra-safe investments. The U.S. bond market was closed on Monday in observance of the Veterans Day holiday.
Among stocks making big moves:
Microsoft plunged 3 percent after it announced the departure of Steven Sinofsky, who ran its Windows division. The unexpected move comes just weeks after Microsoft launched Windows 8, its first major overhaul in years of the operating system used on most of the world's computers. Microsoft fell 90 cents to $27.09.
Weatherford International dropped 15.9 percent after the oilfield services company reported revenue that was lower than analysts had been expecting. The company did not report full results because of accounting problems that have led it to revise its results from numerous periods. The stock fell $1.73 to $9.15.
Apparel chain operator TJX Cos., the parent of TJ Maxx and Marshalls, rose 2.7 percent after raising its full-year earnings forecast and reporting third-quarter revenue that exceeded analysts' expectations. The stock added $1.09 to $42.06.