"This is not small potatoes," said Hugh Johnson, chairman and chief investment officer of Hugh Johnson Advisors in Albany, N.Y. "We're not going to miss a recession by much in 2013 as is."
To be sure, plenty of traders think the "fiscal cliff" is overhyped. Even if the government misses the Monday deadline, the higher taxes and lower government spending would take effect only gradually, and Congress could always repeal them.
Still, that doesn't mean they're not worried about the economy in general.
Derrick Irwin, portfolio manager for Wells Fargo Advantage Funds, said he's "not particularly concerned" about the fiscal cliff — but he is concerned about the economy.
"The economy is going to do what the economy is going to do," Irwin said, "it just doesn't look too good."
Trading volume was light, with many investors still on Christmas vacation. About 2.8 billion shares traded hands, compared to an average this year of about 3.6 billion. Light volume can make the market more volatile. When fewer shares are changing hands, relatively small trades can move the overall market.
The yield on the 10-year Treasury note edged down to 1.74 percent from 1.75 percent.
Among stocks making big moves:
—Chipmaker Marvell Technology Group dropped more than 3 percent, falling 26 cents to $7.14, after the company lost a patent case brought by Carnegie Mellon University. Marvell said it would fight the $1.2 billion ruling.
—JCPenney fell nearly 6 percent, losing $1.23 to $19.52, after rising more than 4 percent the day before. The stock has been volatile as the company tries to remake its image to attract younger shoppers.
—Steinway Musical Instruments fell more than 4 percent, down $1.02 to $21.50, after announcing that it doesn't plan to seek buyers.
AP Business Writer Daniel Wagner contributed from Washington.