A technical issue related to Limit Up-Limit Down bands on the NYSE showed unusual movements and sent dozens of stocks listed on the exchange into volatility pauses. NYSE Equities said the issue had been resolved and the affected stocks were in the process of reopening.

Also weighing on sentiment, a survey from the Institute for Supply Management showed U.S. manufacturing activity eased to 48.7 in May, lower than the expectation of 49.6.

The Dow extended losses, the S&P 500 turned lower and the Nasdaq pared early gains, though falling Treasury yields initially helped lift megacap stocks.

AI leader Nvidia (NASDAQ:NVDA) rose 3.3% after CEO Jensen Huang said on Sunday that the company's next-generation AI chip platform would be rolled out in 2026.

Shares of megacaps including Apple (NASDAQ:AAPL) and Meta (NASDAQ:META) gained between 0.8% and 2.1%, as yields on the benchmark U.S. 10-year and five-year notes fell around 10 basis points each. [US/]

GameStop (NYSE:GME) soared 24.1% after a weekend Reddit post from stocks influencer Keith Gill, also known as "Roaring Kitty", showed a $116 million bet on the gaming retailer.

"The way we closed Friday was so powerful to the upside that we may have had to work off some steam from that. Throw meme stocks and a technical glitch into the mix, and it’s no wonder that markets are bouncing around a little bit today," said Bret Kenwell, US investment and options analyst at eToro USA.

All three of Wall Street's main indexes ended May with strong gains, with the S&P 500 up 4.8%, the Dow gaining 2.3% and the tech-heavy Nasdaq rising nearly 7% on the month, as strong earnings and hopes of easing monetary policy buoyed Wall Street's biggest stocks.

Traders see a 59% chance that the Fed will begin cutting rates in September, up from about 53% before the ISM data was released, according to the CME's FedWatch tool.

Attention turns to a data-packed week that includes surveys on the services sector, factory orders and Friday's closely watched nonfarm payrolls report, providing investors with clues on the health of the U.S. economy and the Fed's likely course of action.

"There may well be a rate cut in September... this will be a week that is full of economic data that'll be important and today was just the first step," said Art Hogan, chief market strategist at B. Riley Financial.

At 12:16 a.m. ET, the Dow Jones Industrial Average was down 321.96 points, or 0.83%, at 38,364.36, the S&P 500 was down 22.43 points, or 0.43%, at 5,255.08, and the Nasdaq Composite was down 3.45 points, or 0.02%, at 16,731.56.

The Dow underperformed, with losses in financial stocks such as Goldman Sachs and JPMorgan Chase & Co (NYSE:JPM) being the biggest drags on the blue-chip index.

Declining issues outnumbered advancers by a 1.18-to-1 ratio on the NYSE and by a 1.13-to-1 ratio on the Nasdaq.

The S&P index recorded 23 new 52-week highs and three new lows, while the Nasdaq recorded 57 new highs and 77 new lows.