A weaker than expected report on factory orders also contributed to the declines. The Dow fell 108-points, S&P gave up 15 points and the Nsadaq tumbled 31 points.

Credit cuts firms America Express, Capital One and Discover dropped after being cut to sell to at UBS. The analyst saying a consumer led recession will hurt their business. Retailers like the Tiffany's also dropped on concerns about weaker spending and the fears about accelerating credit losses weighed on banking shares.

Yahoo extended its gains from Friday, when Microsoft made an unexpected USD 44 billion bid for the search company, while rival Google fell on Monday though, it raised anti-trust questions about Microsoft’s bid.

Rental car company Dollar Trifty plunged over 30% after cutting its outlook for this year and Cisco Systems fell more than 4% ahead of its earnings report on Wednesday.