The Dow Jones industrial average fell about 8 points after climbing nearly 144 in early trading. The Dow had been up the past four days. The Standard & Poor's 500 index also slid and the Nasdaq composite index fell after seven straight gains.
The initial reaction to China's weekend announcement was that a stronger yuan compared with the dollar would allow U.S. manufacturers and exporters to be more competitive selling their products in China. But traders came to see the move as more of a long-term shift rather than something that would give the economy a boost now.
A drop in the euro also eroded investors' excitement over China's move. A slide in the European currency is seen as a sign of faltering confidence in Europe's ability to contain its debt problems.
Many of China's trading partners complain that the country keeps the yuan artificially low to bolster exports. At the same time, the weak currency makes imported goods expensive for consumers in China. Subodh Kumar, an independent investment strategist in Toronto, said some traders at first mistakenly expected to see a lower yuan make demand from China jump the way it did in 2008 when the country enacted a massive economic stimulus plan.
"The notion is that they're going to get the same kick out of China that they did in 2008," Kumar said. "Most of China's moves are long-term."
The news from China hurt retailers because the country's imports would become more expensive. That could cut into earnings, especially since weak consumer spending limits' stores ability to pass higher prices on to their customers. Macy's Inc. fell 3.4 percent, while Wal-Mart Stores Inc. dropped 1 percent.
The focus on China and the euro came on a quiet day with little other news. Light trading volume signaled that many investors were staying out of the market. Traders are looking to a two-day meeting of the Federal Reserve that begins Tuesday. The Fed is expected to keep the federal funds rate, its benchmark interest rate, at historic lows. Traders will be focused on the Fed's assessment of the economy.
The light flow of news left the market vulnerable to more of the big swings that have been common since major stock indexes hit 2010 highs in late April.
"There's nothing down there to move it except rumor and innuendo and traders trying to book a few profits before the end of the day," said James Paulsen, chief investment strategist for Wells Capital Management in Minneapolis, referring to sentiment on trading floors.
The Dow fell 8.23, or 0.1 percent, to 10,442.41. The index had risen 5.2 percent in the past two weeks, its biggest two-week gain since mid-November 2009.
The S&P 500 index fell 4.31, or 0.4 percent, to 1,113.20, and the Nasdaq fell 20.71, or 0.9 percent, to 2,289.09.
Treasury prices fell but were off their lows, while interest rates moved higher. Falling stocks sent more traders searching for the safety of government debt. The yield on the 10-year Treasury note rose to 3.25 percent from 3.23 percent late Friday.
The dollar rose against other major currencies and the euro fell.
Prices for many commodities climbed but ended off their highs. Crude oil rose 64 cents to $77.82 per barrel on the New York Mercantile Exchange. Gold hit a record $1,266.50 an ounce before settling down $17.60 at $1,240.70 an ounce. Copper jumped.
Alcoa rose 61 cents, or 5.5 percent, to $11.72, while Cliffs Natural Resources rose $1.67, or 3 percent, to $57.89.
A profit warning from California Pizza Kitchen Inc. because of weaker-than-expected sales renewed concerns that consumers will continue to hold back spending while they worry about jobs. California Pizza Kitchen fell $2.06, or 10.9 percent, to $16.83.
Macy's fell 72 cents, or 3.4 percent, to $20.74, while Abercrombie & Fitch dropped 82 cents, or 2.3 percent, to $34.51.
Three stocks fell for every two that rose on the New York Stock Exchange, where consolidated volume came to 4.5 billion shares, compared with 4.9 billion Friday.
The Russell 2000 index of smaller companies fell 6.89, or 1 percent, to 660.03.
Overseas markets jumped following China's announcement. They held on to their gains because they closed earlier than U.S. markets. Britain's FTSE 100 rose 0.9 percent, Germany's DAX index added 1.2 percent, and France's CAC-40 climbed 1.3 percent. Japan's Nikkei stock average rose 2.4 percent, while Hong Kong's Hang Seng jumped 3.1 percent.