The Dow Jones Industrial Average was down 60 points at 13,254, as 19 of its 30 components opened in the red.
Financial stocks AIG , American Express Co. , Citigroup Inc. , and J.P. Morgan Chase & Co. led the blue-chips lower.
Merck & Co. , also a Dow component, saw its shares drop 3%. The drug maker backed its 2007 earnings target and said it expects adjusted profit for 2008 to be in a range of $3.28 to $3.38 a share. Analysts had been forecasting earnings of $3.39 for 2008.
The S&P 500 fell 10.3 points to 1,462 and the Nasdaq Composite fell 17 points to 2,619.
Trading volumes showed 104 million shares trading on the New York Stock Exchange and 191 million trading on the Nasdaq stock Exchange. Declining stocks topped gainers by 22 to 6 on the NYSE and by 17 to 5 on Nasdaq.
Financial under renewed pressure
Goldman Sachs cut its estimates of S&P 500 earnings for this year and next to take into account lower profits in the banking industry, according to Bloomberg.
In addition, Punk Ziegel cut its ratings on Goldman Sachs , Bear Stearns and Lehman Bros. to sell from market perform.
H&R Block Inc.'s shares lost 6.6% after it agreed to terminate a previous agreement under which Cerberus Capital Management would have acquired its Option One Mortgage Corp. unit.
And Merrill Lynch fell 1.3%. The firm named Nelson Chai, who was John Thain's chief financial officer at NYSE Euronext , to the same role at the brokerage. Joost van der Does de Willebois will be acting chief financial officer at NYSE Euronext.
Financial and technology stocks paced a decline for stocks on Monday, with the Dow industrials losing 57 points, the S&P 500 falling 8 points and the Nasdaq Composite losing 23 points. Treasury prices jumped, as did interbank lending rates, reflecting the continued nervousness in markets.
In Europe, three-month interbank lending rates reached their highest level since December 2000.
The economic calendar is sparse for Tuesday, in the U.S. at least. San Francisco Fed President Janet Yellen, in an address Monday after stock markets closed, said developments since the last rate policy meeting in October suggest a bigger slowdown than she expected.
Yellen became the third Fed official in a week to suggest that further rate cuts may be advisable on Dec. 11.
Jim Reid, a credit strategist at Deutsche Bank, noted that Fed futures are pricing in a 40% probability of a half-point interest-rate cut next week.
"This does look a little too aggressive in our view, but the Fed may surprise us yet, especially if Friday's employment number is weak," he said.
The Bank of Canada cut interest rates from the current level of 4.5%.
The dollar was trading up 1.3% up at C$1.0135 after the BoC decision. Rate calls are still expected from central banks in Australia, Britain and the euro zone later this week.
Crude-oil futures edged below $89 a barrel as traders awaited a decision from the OPEC oil cartel on Wednesday.
Few earnings releases are on deck, though there are a number of company presentations, with brokerage-sponsored events in the airline, basic materials, media, real estate and technology fields.
Nokia shares dropped 3.1% after the handset maker predicted margins for the next few years would be about in line with market expectations. Nokia also predicted average selling prices in the industry would fall next year. Nokia shares climbed 76% year-to-date heading into the investor presentation.
Phillips-Van Heusen slumped 12% after the clothing manufacturer's earnings outlook was below analyst forecasts.
Trump Entertainment Resorts droppe 9.5% after saying its chief financial officer resigned to take a similar role at another gambling company.
By Nick Godt