Stocks dropped, with blue chips falling to two-month lows, as fears of military intervention in Syria and concerns over the US debt ceiling gave investors a reason to shy away from risk.
The Dow Jones Industrial Average shed 105 points, or 0.7%, to 14841 in recent trade. The Dow was down as much as 122 points at its intraday low of 14824.47, which was the lowest level since June 26.
The S&P 500-stock index fell 17 points, or 1%, to 1640, and the Nasdaq Composite Index gave up 49 points, or 1.3%, to 3608.
Financials and industrials were the weakest sectors while utilities edged higher. Within the Dow, Bank of America declined 1.6% and Microsoft fell 1.5% to pace declines in 24 of 30 components.
Joe Saluzzi, co-head of equity trading at brokerage firm Themis Trading, said while Syria is making the headlines today, he believes the declines are just a "carryover" of the recent weakness, fueled by uncertainty over when the Federal Reserve will start pulling back on stimulus measures.
"Syria is the headline today," Mr Saluzzi said. "If you have a market that could go either way, a headline like that could cause the market to get skittish."
He said light volumes, which have been the norm over the last month, may be exaggerating the reaction to the Syria and debt ceiling news. "If you want to sell on a day like today, it's harder, because the buyers aren't there," Mr Saluzzi said. "It's nothing new here. The trend has been the same the last couple weeks."
Late Monday, Secretary of State John Kerry said the Syrian government's use of chemical weapons is a "moral obscenity" and that the Obama administration has developed conclusive evidence that chemical weapons were used last week. It was the clearest signal yet that the US is considering an attack against President Bashar al-Assad's regime.
The escalating tensions over Syria also pushed up oil prices and other assets seen as havens during times of crisis, such as US Treasurys and gold.
Bob Doll, chief equity strategist at Nuveen Investments, said Syria and debt-ceiling concerns are hitting at a time when "the market is tired and fatigued."
"We're in a little funk," Mr Doll said. "The absence of good news and the increase of uncertainty is never a good thing. [The market] could be sloppy for a while."
Crude-oil futures climbed to six-month highs, with the October contract surging 3% to $US109.06 a barrel. August gold futures gained 1.9% to a three-month high of $US1,419.70 an ounce. The yield on the 10-year Treasury note fell to 2.756% from 2.805% late Monday, as Treasury prices rose.
The dollar slipped against the euro and the yen.
The Treasury Department also said late Monday that it would hit its borrowing limit in mid-October, which is sooner than many expected.
The S&P/Case-Shiller 20-City home price index for June rose 12.1% over the same period a year ago, compared with expectations of a 12.2% increase.
The Conference Board's consumer confidence index August rose to 81.5 in August from 80.1 in July, compared with expectations of a slight decline to 79.1.
Jerry Braakman, chief investment officer at First American Trust, said while the immediate reaction to military action in Syria is likely to be negative for stocks, the effect is likely to be shortlived.
That said, he believes the market will trade sideways over the short-term, with a little more risk to the downside, as the economy adjusts to the recent rise in Treasury yields. The 10-year yield reached a two-year high last week.
"In the near term, there aren't a whole lot of catalysts to move the market significantly higher," Mr Braakman said.
European markets slumped, with the Stoxx Europe 600 down 1.8%, as worries about Syria and the US debt ceiling overshadowed upbeat data out of Germany. The Ifo institute's business confidence index for Germany rose more than expected to 107.5 in August from 106.2 in July.
Asian markets ended mostly lower. Japan's Nikkei Stock Average shed 0.7% as a result of concerns over Syria. China's Shanghai Composite bucked the regional trend, rising 0.3% after data showed total profits among industrial firms in July grew 12% from June, accelerating from a 6.3% increase the previous month.
JC Penney rallied 3.1%, erasing earlier losses. The stock price initially dropped after Pershing Square Capital Management, run by Bill Ackman, disclosed late Monday that it had unloaded its entire 39 million share-stake in the retailer. Mr Ackman had resigned from the company's board earlier this month after he failed to push through a change in the company's management.
Meanwhile, Tiffany declined 0.8%, erasing earlier gains. The high-end jeweler reported fiscal second-quarter earnings that topped expectations and raised its full-year outlook, but revenue fell short of forecasts.