By Sue Chang and Anora Mahmudova, MarketWatch

Deutsche Bank losses weigh on financials

U.S. stocks extended losses Monday as worries about Germany's Deutsche Bank weighed on the financial sector while the upcoming U.S. presidential debate also contributed to jittery sentiment.

The S&P 500 index dropped 18.59 points, or 0.9%, to close at 2,146.10, with financials down 1.5% to lead the laggards.

The Dow Jones Industrial Average fell 166.62 points, or 0.9%, to end at 18,094.83 with Goldman Sachs Group, Inc.(GS) and J.P. Morgan Chase & Co.(JPM) among the biggest losers.

The Nasdaq Composite Index declined 48.26 points, or 0.9%, to close at 5,257.49.

"Concerns about European financials seem to be the primary driver" in the market with the culprit being Deutsche Bank, said Bill Stone, chief investment strategist at PNC Asset Management Group.

Heavy losses for Deutsche Bank took a toll on European markets and pressured U.S. financial shares. U.S.-listed shares of Deutsche Bank(DBK.XE) (DBK.XE) sank 7.1%, after Germany's Focus magazine reported over the weekend that Chancellor Angela Merkel wouldn't support state aid for the bank. The bank denied it had asked for any support, according to a report from Dow Jones Newswires, and the government also dismissed the report.

See:Deutsche Bank woes are stressing out the U.S. stock market (http://www.marketwatch.com/story/how-deutsche-bank-woes-are-stressing-out-the-us-stock-market-2016-09-26)

Presidential debate worries: Politics were also playing a big role in rattling investors ahead of Monday's U.S. presidential debate between Democratic nominee Hillary Clinton and her Republican rival Donald Trump.

"There are conflicting poll numbers and some showing that Mr. Trump is gaining on Hillary Clinton and that is weighing on markets. However, it's also worries over Deutsche Bank that hit European bourses and are spilling over to Wall Street," Ryan Larson, head of equity trading at RBC Global Asset Management.

"The stock market is positioned for a likely Clinton presidency, but as polls show a narrowing gap between contenders and as we get closer to the election day, you will see markets reprice," Larson said.

Larson said it takes time for markets to fully price in an outcome of the election.

A national poll conducted by Bloomberg Politics shows Trump with a two-point lead (http://www.marketwatch.com/story/on-eve-of-debate-trump-pulls-ahead-in-a-national-poll-2016-09-26) over Clinton when factoring in third-party candidates.

The mounting uncertainty as the presidential race heats up is pushing some investors to unwind positions, said Brad McMillan, chief investment officer at Commonwealth Financial Network.

"With the potential for a real change in the race depending on how tonight goes, investors may be thinking there is no harm in moving a bit toward the sidelines," McMillan said. "Markets hate uncertainty, and as the race -- and the implications -- become more uncertain, it would make sense for them to reflect that."

Clinton and Trump will face off for the first of three debates at 9 p.m. Eastern at Hofstra University in Hempstead, N.Y., in what Goldman Sachs has billed as the "biggest matchup since the Mayweather/Pacquiao bout (http://www.marketwatch.com/story/wall-street-starts-to-raise-alarm-bells-over-the-possibility-of-a-trump-presidency-2016-09-26)" -- a much-hyped 2015 boxing match.

Crude-oil futures recovered (http://www.marketwatch.com/story/oil-prices-attempt-a-rebound-as-hopes-rise-for-production-deal-2016-09-26) on renewed hopes that the Organization of Petroleum Exporting Countries and other major oil producers, including Russia, might make progress on a deal to limit production. The producers will meet on the sidelines of an energy conference in Algeria on Wednesday. U.S. crude futures climbed 3.3% to settle at $45.93 a barrel.

Economic docket:Sales of newly constructed homes slipped less than expected in August (http://www.marketwatch.com/story/new-home-sales-stay-stronger-than-expected-as-demand-buoys-a-firmer-pace-of-building-2016-09-26), pointing to some stabilization in a normally choppy market as demand remained strong. Stocks maintained losses after the data release.

Stocks to watch: The market appeared to have second thoughts about CBOE Holdings Inc.'s (CBOE) plan to acquire Bats Global Markets Inc. (BATS) in a deal valued at $3.2 billion. BATS shares surged nearly 20% on Friday when the news of takeover surfaced, but were 4.6% lower Monday. CBOE shares slumped 5.3%.

Shares of Chemtura Corp. (CHMT) soared 16% after German specialty chemical company Lanxess AG (LXS.XE) (LXS.XE) said it plans to buy the Philadelphia-based rival (http://www.marketwatch.com/story/lanxess-to-buy-chemtura-in-27-billion-chemical-company-merger-2016-09-25) in a deal with an enterprise value of around $2.7 billion.

Twitter Inc.(TWTR) erased earlier losses to rally 3.3% on a Bloomberg report that Walt Disney Co.(DIS) is preparing a bid for the social media company. Twitter shares had soared last week on news that the company was talking with a number of potential suitors (http://www.marketwatch.com/story/why-a-salesforce-deal-to-go-after-twitter-makes-no-sense-2016-09-24), including Salesforce.com Inc. (CRM). Shares of Disney were off 1.4%.

(CRM)Pfizer Inc. (PFE) fell 1.8% after the pharmaceutical group said it would not split into two separate, publicly traded entities (http://www.marketwatch.com/story/pfizer-decides-against-splitting-into-two-companies-2016-09-26).

Shares of Smith & Wesson Holding Corp. (SWHC) slumped 7.4% after the gun maker disclosed in a filing that its bid to make replacements for the U.S. Army's standard M9 sidearm was denied (http://www.marketwatch.com/story/smith-wessons-stock-slumps-after-missing-out-on-us-army-deal-2016-09-26).

(CRM)Other markets: Deutsche Bank's losses drove the Stoxx Europe 600 index (http://www.marketwatch.com/story/european-stocks-face-worst-day-in-almost-3-months-as-oil-deutsche-bank-shares-slump-2016-09-26) to its worst day in nearly three months, with the index sharply lower.

The Nikkei 225 index (http://www.marketwatch.com/story/asian-markets-drop-on-global-oil-worries-2016-09-25) fell 1.3% as the Japanese yen pushed higher against the U.S. dollar. The dollar (http://www.marketwatch.com/story/dollar-gives-back-some-against-the-yen-2016-09-26) last traded at Yen100.30, against Yen101.035 seen late Friday in New York.

Bank of Japan Gov. Haruhiko Kuroda on Monday said there is "no limit to monetary policy" (http://www.marketwatch.com/story/bojs-kuroda-ready-to-cut-rates-deeper-into-negative-territory-2016-09-26) in his first speech since last week's decision by the Japanese central bank to overhaul its stimulus program.

See: Bank of Japan's big move isn't dispelling fears that central banks are out of ammo (http://www.marketwatch.com/story/bank-of-japans-big-move-isnt-dispelling-market-fears-that-central-banks-are-out-of-ammo-2016-09-24)

Gold futures (http://www.marketwatch.com/story/gold-eases-from-multimonth-high-as-focus-turns-to-us-presidential-debate-2016-09-26) rebounded to trade up 0.2%, while the dollar, as gauged by the ICE U.S. Dollar Index , slipped 0.2%.

--Barbara Kollmeyer contributed to this article.

(END) Dow Jones Newswires

September 26, 2016 16:29 ET (20:29 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.