Deutsche Bank's U.S.-listed shares fell 6 percent to a record low of $11.96, and dragged on big Wall Street banks, after a German magazine said Chancellor Angela Merkel has ruled out state assistance for the lender.
The bank said it had no need for German government help with a $14 billion U.S. demand to settle claims it missold mortgage-backed securities, reports Reuters.
The S&P financial index dropped 1.02 percent, the most among the 10 S&P 500 sectors that were in the red. Goldman Sachs' 1.6 percent decline made it the top drag on the Dow. JPMorgan (JPM.N) dropped 1.2 percent.
Pfizer fell 1.4 percent after the drugmaker abandoned a plan to split into two. The stock was the biggest drag on the healthcare index, which was down 1 percent.
While the White House race has so far had little discernible effect on the market, that may soon change as polls show a tightening race ahead of the first debate between U.S. presidential candidates Hillary Clinton and Donald Trump.
With just over six weeks until Election Day, some investors see a toss-up contest creating volatility in certain sectors, including health insurers, drugmakers and industrials.
"The polls have both candidates neck-to-neck. The debates might increase the lead of one over the other and that's what the market is fearful of," said Peter Cardillo, chief market economist at First Standard Financial in New York.
At 9:43 a.m. ET the Dow Jones Industrial Average was down 139.57 points, or 0.76 percent, at 18,121.88.
The S&P 500 was down 14.17 points, or 0.65 percent, at 2,150.52.
The Nasdaq Composite was down 41.23 points, or 0.78 percent, at 5,264.52.
Oil prices rallied in volatile trading as the world's largest producers gathered in Algeria to potentially work out a plan to limit output, though analysts see slim chances of a deal being worked out.
Energy was the only one among the 11 major S&P sectors trading higher, eking out a 0.16 percent gain.
Chemical company Chemtura soared 15.6 percent to $32.59 after Germany's Lanxess offered to buy the company for $2.69 billion, including debt.
Declining issues outnumbered advancing ones on the NYSE by 1,995 to 716. On the Nasdaq, 1,790 issues fell and 546 advanced.
The S&P 500 index showed no new 52-week highs and one new lows, while the Nasdaq recorded 15 new highs and 10 new lows.