Stocks ended lower Monday as a major selloff in China sent oil prices lower and dragged on the U.S. market.
The Dow Jones Industrial Average shed nearly 50 points, or 0.5 percent. The S&P 500 and Nasdaq lost nearly 1 percent.
But all three major indexes gained for the month of August: The Dow rose 3.5 percent, the Nasdaq advanced 1.5 percent and the S&P 3.4 percent. For the Nasdaq and S&P, it was their sixth straight monthly gain. The Dow is up five of the past six months, but this is only the second consecutive monthly gain.
Chinese stocks tumbled 6.7 percentas the sharp rise in stock valuations overwhelmed improving corporate earnings. The Shanghai Composite Index lost nearly 22 percent in the month of August, snapping a seven-month winning streak.
Oil dropped nearly $3, settling below $70 a barrelas the selloff in China raised doubts about the recovery here in the U.S. Shares of Dow energy components Chevron and ExxonMobil each lost more than 1 percent.
The big buzz of the day was that Disney has agreed to buy comic-book titan Marvel Entertainment for $4 billion.
Shares of Marvel soared more than 25 percent on the news. Disney shed 3 percent.
In other deal news, Baker Hughes said it was buying oilfield services company BJ Services in a stock and cash deal worth $5.5 billion.
The deal represents a 16 percent premium over BJ's closing price Friday.
Financial stocks retreated after their strong rally last week. Rochdale Securities analyst Richard Bove wrote that, in the short term, "a reaction to the recent move up in the stocks may develop." And Barron's recommended profit-taking in Citigroup and said AIG shares were overpriced after gaining more than 50 percent last week. Citi shares lost 4.4 percent and AIG fell nearly 10 percent.
Morgan Stanley shares dropped 1.9 percent after Bank of America-Merrill Lynch downgraded its rating on the stock, in part due to a belief that more investors are turning retail rather and institutional brokerages. BofA-Merrill also said Morgan's shares are no longer undervalued.
Financials have been on such a tear that they locked four of the five top spots on the Dow for August: American Express and Bank of America jumped 19 percent, while Travelers shot up 17 percent, and JPMorgan Chase gained 13 percent.
The nonfinancial in the Dow's top five for August was Boeing, which gained 16 percent.
The bottom five were Verizon, P&G, Coca-Cola, Cisco and ExxonMobil.
The curious rise in government-sponsored entities Fannie Mae and Freddie Mac may be running out as well: FBR Capital said the August surge of the two stocks was based on speculation of a reverse stock split.
Ford is ramping up production as new models have been well received, stirring speculation that it may eclipse Toyotafor the No. 2 spot.
In the day's only economic news, business activity in the Midwest picked up at a faster pace than economists had expected: The Chicago Institute for Supply Management reported its gauge of business activity in the region rose to 50, right on the line between expansion and contraction, from 43.3 in July. It was the highest reading since September 2008. Economists surveyed by Reuters had expected the index to hit 48.
Still, stocks retreated as economists said much of the good economic news is already priced into the market.
Still to come this week, we'll get readings on auto sales on Tuesday and the August jobs report on Friday.
Small-cap pharmaceutical Delcath Systems saw its shares soar more than 18 percent Friday after health regulators granted an orphan drug status to doxorubicin, a chemotherapy agent, for the treatment of primary liver cancer.
As the first anniversary approaches of the Lehman Brothers collapse, PriceWaterhouseCoopers says claims against Lehman could reach as much as $100 billion.
Volume was light, with 1.38 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, roughly 11 to 4.
— Reuters contributed to this report.