Wall Street equities also stumbled on a wave of uncertainty over the future of U.S. Deputy Attorney General Rod Rosenstein, who oversees the special counsel investigation into Russia's role in the 2016 presidential election.
The White House said President Donald Trump and Rosenstein are scheduled to meet on Thursday to discuss Rosenstein's future.
The White House announced the meeting after a flurry of conflicting media reports on whether Rosenstein had resigned.
The New York Times last week reported that Rosenstein had suggested secretly recording Trump in 2017 and recruiting Cabinet members to invoke a constitutional amendment to remove him from office.
The Dow Jones Industrial Average fell 181.45 points, or 0.68 percent, to 26,562.05, the S&P 500 lost 10.3 points, or 0.35 percent, to 2,919.37, and the Nasdaq Composite added 6.29 points, or 0.08 percent, to 7,993.25.
Investors were also factoring in a widely expected interest rate hike by the Federal Reserve at its two-day meeting that begins on Tuesday.
U.S. Treasury yields across maturities briefly fell by around two basis points after an initial report that Rosenstein had resigned before ticking back up.
Benchmark 10-year notes last fell 6/32 in price to yield 3.0907 percent, from 3.068 percent late on Friday.
In European equities markets, the benchmark index for euro zone blue chip stocks retreated nearly 0.6 percent.
China and the United States, the world's two biggest economies, imposed a new round of tariffs on each other's goods on Monday, showing no signs of backing down from an increasingly bitter trade dispute that is expected to knock back global economic growth.
"Investors are starting to see the writing on the wall that China is starting to dig in its heels and so is the U.S," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, in Charlotte, North Carolina. "It's a general risk-off tone, a sense that people are becoming a little bit more cautious."
Brexit, as Britain's planned exit from the European Union is known, also weighed on sentiment. On Friday, British Prime Minister Theresa May said talks with the EU had hit an impasse.
British opposition leader Jeremy Corbyn said on Sunday he would support a second Brexit referendum if his Labour Party is supportive, heaping more pressure on May, amid speculation that she could opt to call a snap parliamentary election.
European Central Bank chief Mario Draghi said he expected a vigorous pickup in euro zone inflation, backing moves toward unwinding an ECB asset purchase program meant to stimulate the economy. That drove the euro to a more than three-month high against the dollar.
The dollar index rose 0.04 percent.
Oil prices jumped more than 3 percent to a four-year high after Saudi Arabia and Russia ruled out any immediate increase in production despite calls by Trump for action to raise global supply.
U.S. crude rose 2.12 percent to $72.28 per barrel and Brent was last at $81.47, up 3.39 percent. - Reuters
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