About few minutes into trading, the Dow Jones Industrial Average was down 164.34 points, or 0.52%, at 31,173.81, the S&P 500 was down 42.84 points, or 1.10%, at 3,856.54 and the Nasdaq Composite was down 221.09 points, or 1.90%, at 11,414.22.
Twitter fell 6.7% after Elon Musk announced late Friday that he would abandon his $44 billion offer to buy the social media platform, while the microblogging site said it would sue the billionaire to enforce his commitment to the purchase.
European markets fell as the shutdown of a major gas pipeline from Russia to Germany for annual maintenance brought concern Russia might not resume the flow of gas as scheduled.
Wall Street was off to a strong start this month after a brutal first half of 2022, but traders are fearing another round of heavy selloff if the big US companies fail to meet expectations on July.
The Nasdaq is set to break its five-day winning streak, weighed down by sharp declines in heavyweights Apple Inc , Microsoft Corp and Amazon.com Inc in early trading.
The market is largely pricing in a 75-basis-point rate increase later in July, although concerns about the pace of future hikes have grown after a stronger-than-expected jobs report on Friday.
The report, which signalled a still strong labor market, helped alleviate some fears about an immediate recession, but added to worries about more aggressive monetary policy tightening by the Fed to stamp out soaring inflation.
Wall Street will get some key updates this week on inflation. The US government on Wednesday will release its June report on inflation's impact on consumer prices and a report on Thursday about the impact on prices for businesses.
The latest round of corporate earnings ramps up this week with Delta Air Lines reporting their latest results on Wednesday. JPMorgan Chase will report results on Thursday, with Citigroup and Wells Fargo reporting on Friday.
"Not only are people worried that earnings are going to come in weak because of an economic slowdown, but also because of the rise of the U.S. dollar which creates a headwind for earnings for multinationals," said Robert Pavlik, senior portfolio manager at Dakota Wealth Management.
Banks, which mostly benefit from rising interest rates are also expected to take a hit from weakness in M&A activity and advisory business, as per Pavlik.
An increase in loan loss reserves is expected to impact second-quarter profits at big US banks.
Focus will also be on US consumer prices data later this week to gauge the state of inflation and how aggressively the Fed could respond.
US casino operators Las Vegas Sands, Wynn Resorts and Melco Resorts were down between 7.8% and 10.3% after Macau shut all its casinos for the first time in more than two years in a bid to curtail the spread of the coronavirus pandemic.
Declining issues outnumbered advancers for a 3.42-to-1 ratio on the NYSE and for a 3.46-to-1 ratio on the Nasdaq.
The S&P index recorded one new 52-week high and 29 new lows, while the Nasdaq recorded 12 new highs and 25 new lows.
The US Federal Reserve has been aggressively raising interest rates to try and slow down economic growth and cool inflation.
The key concern for Wall Street is whether the central bank hits the brakes too hard on economic growth and skids the economy into a recession. The concerns have grown heavier as economic indicators point to an already slowing economy.
