The Dow Jones industrial average lost 275.67 points, or nearly 3 percent, to close at 9,269.50, as Boeing put pressure on the broader markets. The company lost out on a projected $200 billion U.S. government contract for fighter jets.
The Nasdaq composite index dropped 69.44 points, or nearly 4 percent, to 1,6.99.52. CNET's technology indexes were mostly down, with the largest gains in the PC software and Internet e-tailers sectors.
Last week, the markets staged a surprise rally and largely held onto those gains despite news that durable-goods orders, an important measure of the state of manufacturing, plunged in September.
Analysts saw that uptick as a sign that terrorism news and bad economic indicators aren't as important as long-term optimism about growth.
"Last week's economic data were unambiguously negative," said Peter Hooper, a Deutsche Banc Alex Brown analyst. "The stock market appeared to look past the bad news and improved further on the week, with prices returning close to their pre-attack level," he said. He attributed this to investors' belief that the Federal Reserve will cut interest rates by 50 basis points at its Nov. 6 meeting.
In technology news, eBay reaffirmed its fourth-quarter earnings estimates and said it expects gross merchandise sales to increase over the next four years. Shares in the online auctioneer fell $4.38, or 8 percent, to $52.62. CNET's Internet e-tailing index was up 3.91 percent.
General Motors said it will sell Hughes Electronics, its satellite TV unit, to EchoStar Communications for $25.8 billion in cash and stock. EchoStar fell $1.81 to $24.08, and Hughes Electronics was off 99 cents, or 6 percent, to $14.36.
WorldCom shares were up 39 cents to $13.77 after Lehman Brothers upgraded the stock to "strong buy" Monday. The adjustment was based on WorldCom's solid third-quarter results last week, good balance-sheet management and attractive valuation.
EMC fell 46 cents to $12.95 after gaining around 4 percent earlier in the day. The company unveiled a slew of new software products that run on data-storage machines made by rival companies.
Among other actively traded shares, Intel lost $1.68 to $24.18; Cisco Systems was down 87 cents to $12.95; Oracle fell 17 cents to $13.41; and Microsoft lost $2.56 to $59.64.
AOL Time Warner fell $1.35 to $32.15. Yahoo fell 76 cents to $11.30, and Amazon.com was off 51 cents to $7.05.
Staff and Reuters contributed to this report.