The Dow Jones Industrial Average lost 64 points, or 0.5%, to 13937 in mid-afternoon trading Monday. The Standard & Poor's 500-stock index fell nine points, or 0.6%, to 1507.
Financial and industrials shares, seen as most sensitive to the economy, led declines across nine of the index's 10 sectors while defensive groups such as utilities performed relatively better.
The Nasdaq Composite Index slipped seven points, or 0.2%, to 3155.
Barnes & Noble surged 10% after Leonard Riggio, the company's chairman and largest shareholder, confirmed he has an interest in buying out the retailer's consumer-bookstore chain.
Lowe's fell 1.2% after the home-improvement retailer's current-year earnings forecast trailed analysts' predictions. Major benchmarks retreated from morning highs after some exit polls showed former Italian premier Silvio Berlusconi's political party gaining ground in the country's general election.
Earlier readings had indicated Pier Luigi Bersani's center-left coalition government, seen as the most market-friendly group, had a commanding lead.
The results could influence whether Italy continues with austerity measures meant to bolster the country's finances. On the domestic front, business activity among Texas-area manufacturers is expanding at a slower rate this month than in January, according to the Federal Reserve Bank of Dallas' general business activity index.
Elsewhere in corporate news, Hertz Global Holdings climbed 6.1% after reporting fourth-quarter results that exceeded analysts' estimates, citing improved pricing and the benefits of acquiring the Dollar Thrifty Automotive Group.
Hertz gave an upbeat outlook for the current year. Chesapeake Energy slumped 5.6% after agreeing to sell interests in a northern Oklahoma oil and gas field to Sinopec International Petroleum Exploration and Production for $1.02 billion.
Analysts said the price appeared to represent a discount. Affymax plunged 85% after the company and Takeda Pharmaceuticals issued a national recall of their antianemia drug amid reports of severe allergic reactions, including a handful of deaths, in some patients with kidney disease.
Affymax's chief executive said it is too early to determine how certain patients developed fatal reactions to the drug or what the company's next steps are. Amgen, maker of the blockbuster anemia drug Epogen, rallied 4.8%, the biggest gain among S&P 500 components.
EUROPEAN STOCKS, BONDS
Italy's benchmark stock index ended higher Monday following a roller-coaster intraday ride as investors considered various reports about the likely outcome of the nation's general election.
Italy's FTSE MIB index climbed 118.71 points, or 0.7%, to finish at 16,351.99. Italians voted in a general election on Sunday and Monday, with investors eagerly awaiting the results to see if Italy can manage to form a stable and effective government that will continue the austerity agenda now in place.
Exit polls from the election on Monday pointed to a lead for the center-left bloc of Pier Luigi Bersani. That news initially buoyed the Italian stock index to an intraday high of 16,883.31, but it pared gains after media reports said that an early vote count showed that the center-right group of former Prime Minister Silvio Berlusconi was leading in the Senate race.
The pan-European Stoxx 600 index slipped 0.1% to end at 288.40, though most other country-specific indexes gained. For the broader European stock markets, most indexes started out on a strong footing, boosted by a positive trading session in Asia.
Germany's DAX 30 index rose 1.5% to 7,773.19. Shares of Deutsche Boerse AG rallied 5.6%. Bloomberg News reported that CME Group Inc. had approached the German exchange about a tie-up, but Deutsche Boerse said it isn't in merger talks with CME.
Shares of K+S AG gained 2.6% after Citigroup lifted the chemicals firm to buy from neutral. France's CAC 40 index rose 0.4% to 3,721.33, with shares of Vivendi SA up 3.2%.
French TV BFM reported that private-equity-owned French cable operator Numericable is preparing a cash offer for Vivendi's telecom operator SFR. A representative from Vivendi said that "SFR is not for sale".
The U.K.'s FTSE 100 index gained 0.3% to 6,355.37, even after Moody's Investors Service late Friday slashed the country's credit rating to Aa1 from Aaa. Pearson PLC was the biggest decliner in the FTSE 100, with its shares down 3.7% after the publishing firm said it expected tough trading conditions and structural industry changes to continue in 2013.
ASIA-PACIFIC STOCKS, BONDS
Asian markets were mostly higher Monday, with Japanese stocks boosted by a yen which weakened on reports of who was likely to run the Bank of Japan, while markets across the region mulled slower growth in China's manufacturing activity.
The U.S. dollar moved sharply higher against the yen on reports that the Japanese government plans to nominate Haruhiko Kuroda for the governorship of the central bank.
The current head of the Asian Development Bank, Mr. Kuroda is regarded as a supporter of Prime Minister Shinzo Abe's monetary easing goals, which have seen the yen weaken sharply since mid-November.
The weakness in the yen set the scene for another surge in Japanese stocks, with the Nikkei Stock Average ending up 2.4% at 11662.52, its highest close since September 2008.
Banks and exporters posted strong gains in Tokyo: Honda Motor added 1.6% and Mitsubishi UFJ Financial Group rose 2.7%. Sharp Corp. dropped 5.2% after a report saying that the electronics company's talks with Taiwan's Hon Hai Precision Industry Co. were over and it now has plans to raise up to Y200 billion in capital.
Representatives from Sharp and Hon Hai told The Wall Street Journal by telephone that the report about talks being suspended wasn't true.
The main data point for Asia on Monday was preliminary Chinese manufacturing data for February, which came out at 50.4 compared to a final reading of 52.3 in January.
The measure however still remains above 50, indicating an expansion in manufacturing activity. In Hong Kong, the Hang Seng Index ended up 0.2% at 22820.08, while the Shanghai Composite in mainland China climbed 0.5% to 2325.82.
Weighing on the Hong Kong market were local developers, which fell after the city's government announced a new round of measures to cool the market. Sun Hung Kai Properties lost 1.3% and Sino Land dropped 0.6%. South Korea's Kospi Composite lost 0.5% to 2009.52.
Base metals were mostly lower at the close of London Metal Exchange floor trading Monday, slipping in late afternoon trade as the euro softened versus the dollar.
At the PM kerb close, LME three-month aluminum was down 0.6% at $2,036/ton. Nickel lost the most ground, down 1.6% at $16,700/ton. Copper held up the best of the base metals Monday, closing 0.5% higher on the day at $7,836/ton.
Crude-oil futures settled a touch lower Monday, trading in a tight range as a slowdown in Chinese manufacturing fed concerns over energy demand.
Crude oil for April delivery fell 2 cents to $93.11 a barrel on the New York Mercantile Exchange. Gold futures ended higher as investors flocked back to the yellow metal after last week's steep declines.
The most actively traded contract, for April delivery, rose $13.80, or 0.9%, to settle at $1,586.60 a troy ounce on the Comex division of the New York Mercantile Exchange.
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