Some investors worried that the accusation could distract Mr. Trump from his economic agenda of introducing tax cuts and simplifying regulations that has powered a record-setting rally on Wall Street since the election.
The lack of detail on Mr. Trump’s proposals, his isolationist stance and setbacks in filling his Cabinet have made investors question whether the post-election rally has run its course.
Mr. Trump signed a revised executive order on Monday for a 90-day travel ban to the United States from six Muslim-majority countries.
The CBOE Volatility index, also dubbed Wall Street’s fear gauge, rose for the first time in four days.
“We’ve been able to digest a lot of intrigue coming out of Washington and markets haven’t taken a much of pause here so I think the pause starts this week, and perhaps even starts today,” said Art Hogan, chief market strategist at Wunderlich Equity Capital Markets in New York.
Valuations are a cause of concern. The S&P 500 is trading at about 18 times forward earnings estimates against the long-term average of 15 times, according to Thomson Reuters data.
After a three-day winning streak, the benchmark index has alternated between gains and losses in the past five sessions.
Investors are also gearing up for a U.S. interest rate hike; bets for a move next week have jumped to 85 percent from just about 30 percent at the start of last week.
Rising geopolitical tensions in East Asia after North Korea fired four ballistic missiles also weighed on global stock markets.
At 12:37 p.m. ET (1737 GMT), the Dow Jones Industrial Average was down 67.79 points, or 0.32 percent, at 20,937.92; the S&P 500 was down 11.8 points, or 0.49 percent, at 2,371.32 and the Nasdaq Composite was down 36.46 points, or 0.62 percent, at 5,834.30.
All of the 11 major S&P sectors were lower. Financials, which gained the most in the post-election rally, took the biggest hit, while utilities that have lagged since November brought up the rear.
Among stocks, Netflix was the top stock on the S&P, up 1.4 percent to $141.15, following a UBS rating upgrade to “buy”.
Tyson Foods was down 3.1 percent at $61.63 after a strain of bird flu was detected in a chicken breeder flock on a Tennessee farm contracted with the company.
Declining issues outnumbered advancers on the NYSE by 2,297 to 569. On the Nasdaq, 2,151 issues fell and 622 advanced.
The S&P 500 index showed eight new 52-week highs and seven new lows, while the Nasdaq recorded 39 new highs and 45 new lows.