The major U.S. economic reports were not due until later in the week, leaving investors to rehash the European debt crisis and talks in Washington over the "cliff" of tax increases and government spending cuts set to take effect Jan. 1.
"The themes seem about as recycled as Thanksgiving turkey," David Kelly, chief global strategist at JPMorgan Funds, wrote in a note to clients.
He expected a better read on the economy later this week, with reports on consumer confidence on Tuesday and unemployment claims and third-quarter economic growth on Thursday.
Scott Carmack, co-portfolio manager at Leader Capital in Portland, Ore., said the decline Monday was all but inevitable after last week, when the Dow climbed 3.3 percent because of encouraging signs from Washington and good economic news overseas.
That made Monday a good day to cash out on last week's gains, Carmack said, especially because traders aren't sure how the fiscal cliff will affect the market for the rest of the year.
"Monday is a good day to take profits," Carmack said. "No one was in on Friday, so they're doing it Monday."
The National Retail Federation reported that 247 million shoppers visited stores and shopping websites during the long Thanksgiving weekend, up 9 percent from a year ago. They spent an average of $423, up 6 percent.
Some worry that the momentum won't last, and that deep discounting will hurt stores. Macy's fell $1.87, or 4.5 percent, to $39.86. Saks dropped 29 cents, or 2.8 percent, to $10.23. Target declined $1.71, or 2.6 percent ,to $62.77.
Abercrombie & Fitch was an exception, rising 21 cents to $44.61.
The cliff cast a pall. A government report released Monday warned that a sudden increase in taxes would crimp the spending of middle class families next year, and some analysts wondered whether families would curb spending before the year is over.
The report, by President Barack Obama's National Economic Council and his Council of Economic Advisers, estimated that a married couple earning between $50,000 and $85,000 with two children would see a $2,200 increase in their taxes.
In Europe, leaders of European Union countries tried to reach a deal to lend more money to debt-crippled Greece. The ministers have failed twice in the last two weeks to reach an agreement to release (euro) 44 billion, or $56.8 billion.
In the U.S., though, "Most of these uncertainties have been with us for quite some time," Sam Stovall, chief equity strategist at S&P Capital IQ, wrote in a note Monday, "and are now regarded by many as annoyances to resolve rather than obstacles to fear."
In the bond market, the yield on the 10-year U.S. Treasury note fell 2 percentage points to 1.66 percent from late Friday.
In other stock trading:
McGraw-Hill announced it would sell its education unit to a private equity firm. The company's stock rose 20 cents, or 0.4 percent, to $51.89.
Facebook stock jumped $1.94, or 8.1 percent, to $25.94 after a Bernstein analyst upgraded his rating of the company, predicting it will beat revenue expectations for the near future.