Stocks fell in choppy trade on Monday as political uncertainty in Italy fueled investor concern the euro zone debt crisis could engulf the bloc's third biggest economy.

Prime Minister Silvio Berlusconi struggled to hang on to power and denied reports he would resign soon. Markets were on edge before a key parliamentary vote on budget reforms that could turn into a test of his leadership.

The bears say the problems in Italy are so big that there is just no way anything can be done. It is so sizable it is difficult to see how any of this is going to work, said Stephen Massocca, managing director, Wedbush Morgan in San Francisco.

Also helping to boost sentiment was a report the European Investment Bank could provide up to 74 billion euros of lending support to regional banks over two years if the EIB's capital base was reinforced.

Obviously that sounds good, anything that is going to put more ammo into the guns is obviously going to help, said Massocca.

The Dow Jones industrial average fell 27.39 points, or 0.23 percent, at 11,955.85. The Standard & Poor's 500 Index was down 4.75 points, or 0.38 percent, at 1,248.48. The Nasdaq Composite Index was off 20.34 points, or 0.76 percent, at 2,665.81.

Markets have been extremely sensitive to headlines from Europe, with equities changing directions as traders react to any developments in the region.

With a light U.S. economic calendar this week and earnings season winding down, the euro zone debt crisis was expected to garner the bulk of investor attention this week.

Food distributor Sysco Corp dipped 0.9 percent to $27.54 after posting quarterly results.

Consumer electronics chain Best Buy Co Inc lost 1.5 percent to $26.89 after the consumer electronics chain said it is buying British partner Carphone Warehouse Group Plc for $1.3 billion and scrapping plans for a chain of European megastores.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)