Stocks fell for the first time in four sessions on Monday as investors took a pause after a sharp rally in the previous session.
The Dow Jones Industrial Average closed 105.46 points lower, or 0.4% at 27,909.60. The S&P 500 pulled back 0.3% to 3,135.96 and the Nasdaq Composite slid 0.4% 8,621.83. Apple fell 1.4% to lead the Dow lower.
The losses ended a three-day winning streak on Wall Street and came after the major averages rose to near-record highs late last week, boosted a U.S. jobs report that easily topped analyst expectations. The world's largest economy added 266,000 jobs in November, according to data released by the Labor Department.
The Dow rallied more than 300 points on Friday while the S&P 500 came back to post a slight weekly gain. Friday's strong session came after the market got off to a slow start last week.
"We were impressed by the counterattack by the bulls," JC O'Hara, chief market technician at MKM Partners, said in a note. "Last week, while selling pressure did pick up, it was not intense enough for us to reverse our positive outlook on equities. Our shorter-term indicators did not fully reset, but that shows just how aggressive the bulls are."
During Monday's session, investor focus turned back to the prospect of a limited trade agreement between the U.S. and China, with less than a week to go before Washington is set to impose even more tariffs on Chinese goods.
China Assistant Commerce Minister Ren Hongbin said Monday the country hopes to make a deal with the U.S. "as soon as possible." Ren's comment came after data showed Chinese exports fell for a fourth straight month in November, potentially increasing pressure on China to make a deal.
Trade-sensitive names including Apple came under pressure on Monday as a Dec. 15 deadline to impose tariffs on another $156 billion on Chinese goods remained in place.
Larry Kudlow, director of the White House National Economic Council, told CNBC on Friday that both sides were "close" to a deal, but suggested Trump was prepared to "walk away" if certain conditions were not met.
The U.S. and China have imposed tariffs on billions of dollars' worth of one another's goods since the start of 2018, battering financial markets and souring business and consumer sentiment.
"Under the surface, even though the market is holding on to the majority of the gains after a slow start in December, there is still a little bit of nervousness," said Dan Deming, managing director at KKM Financial. He noted traders have been loading up on Cboe Volatility Index options ahead of the Dec. 15 deadline. "There's a cautious optimism in the market right now, but there are just so many items for the market to contend with."
Meanwhile, House Democrats and the Trump administration are close to reaching a tentative deal on replacing the North American Free Trade Agreement after months of deliberations, sources told CNBC. The Democratic-held House could vote on the United States-Mexico-Canada Agreement by Dec. 18, according to the sources.
In corporate news, Sanofi will acquire biotech company Synthorx for $2.5 billion, or $68 per share. The acquisition price represents a 172% premium from Synthorx's close of $25.03 on Friday. The deal is expected to close in the first quarter of next year.
Virgin Galactic shares jumped more than 12% after an analyst at Morgan Stanley initiated them with an overweight rating, citing the company's potential to disrupt the airline industry.
—CNBC's Yun Li and Sam Meredith contributed to this report.