Investors initially cheered the Fed's surprise decision to keep its stimulus in place because the program has helped sustain a bull run in stocks dating back to March 2009.
Doubts have crept into investors' minds, however, because the central bank thinks the economy isn't strong enough for it to pull back the stimulus. William Dudley, the President of the Fed's New York Branch said Monday that while the economy was improving, "the headwinds" created by the financial crisis were only easing slowly.
"At first blush (the stimulus) looks positive," said Kate Warne, an investment strategist at Edward Jones, a financial advisor. "But at second blush it says conditions weren't as strong as we were previously thinking. Markets are now responding to that."
The Fed is buying $85 billion in bonds each month to hold down long-term interest rates and encourage borrowing and spending.
On Monday, the S&P 500 index dropped 8.07 points, or 0.5 percent, to 1,701.84. The index was fractionally lower than its level before the Fed's statement last Wednesday.
The Dow fell 49.71 points, or 0.3 percent, to 15,401.38 The Nasdaq composite fell 9.44 points, or 0.3 percent, to 3,765.29.
Financial stocks fell the most among the 10 industrial groups in the S&P 500 index. Investors sold on concerns that earnings would be hurt by lower trading volumes of bonds and foreign currencies at investment banks.
Citigroup fell $1.64, or 3.2 percent, to $49.57 after the Financial Times reported that the bank had suffered a "significant decline" in trading revenues that would crimp its earnings.
Goldman Sachs, which began trading on the Dow Monday, also fell. The stock slipped $4.50, or 2.7 percent, to $165.20.
Utilities were the best performing industry group in the S&P 500 index as investors sought less risky places to put their money.
Nike and Visa, along with Goldman, also began trading on the 30-member Dow on Monday, replacing Alcoa, Bank of America and Hewlett-Packard.
The threat of a looming political showdown over the budget also weighed on investors.
The U.S. House of Representatives voted to defund President Barack Obama's health care law on Friday, a gesture that reminded Wall Street that the Republican-led House and the Democratic-controlled Senate are poised for a showdown over spending.
The debt ceiling must be raised by Oct. 1 to avoid a government shutdown, and a potential default on payments, including debt, later in the month.
"There seems to be a higher probability there will be more of a battle over that," said Scott Wren a senior equity strategist at Wells Fargo Advisors. "That could inject some volatility into the market."
Apple rose the most in the S&P 500 after shoppers snapped up 9 million of its newest iPhones following a rollout of the devices on Friday. The company's stock climbed $23.23, or 5 percent, to $490.60.
Shares of the troubled smartphone maker Blackberry rose 1.1 percent to $8.82 after financial company Fairfax Financial Holdings offered to buy the company in a deal valued at $4.7 billion.
The company's stock had been trading about 5 percent lower before the deal was announced. Blackberry plunged Friday after the company announced a loss of nearly $1 billion and layoffs of 4,500 workers.
The Standard and Poor's 500 index is up 19 percent for the year. If the index closed the year at its current level it would log its best gain since 2009, when it rose 23 percent.
In government bond trading, the yield on the 10-year Treasury note fell to 2.70 from 2.74 percent.
In commodities trading, the price of oil fell $1.16, or 1.1 percent, to $103.59 a barrel. The price of gold fell $5.50, or 0.4 percent, to $1,327 an ounce.
The dollar rose against the euro and fell against the Japanese yen.