U.S. stocks fell on Monday as the chance of a last-minute deal to resolve a budget impasse in Washington appeared dim, moving the government closer to a partial shutdown.

Losses were broad, with each of the ten major S&P 500 sectors lower on the day, led by energy and financials shares.

But the S&P 500 index managed to cut its initial losses almost in half, as market participants have grown accustomed to political battles in Washington resulting in a last-minute accord.

"Quite frankly, ultimately there will be some kind of compromise in Washington. I don't think there will end up being an extended government shutdown," said Stephen Massocca, managing director, Wedbush Equity Management LLC in San Francisco.