Stocks declined on Monday, pressured as a sharp drop in Chinese equities led to weakness in the energy sector.

The sell-off in China sparked a drop in the price of crude oil as it spurred concerns about future demand.

October crude futures sank 4.4 percent, or $3.17, to $69.57 per barrel. The S&P Energy index <.GSPE> slid 2.1 percent to 390.44. Exxon Mobil was off 1.1 percent at $69.35 and Chevron Corp lost 1.5 percent to $69.64. Both weighed on the Dow.

In China, the Shanghai Composite index <.SSEC> fell nearly 7 percent to a three-month low on fears that banks would rein in their lending.

The Bank of New York Mellon index of leading Asian ADRs <.BKAS> fell 1.5 percent to 119.89 while U.S.-listed shares of China Finance Online sank 2.1 percent to $9.40.

Recent slides in Chinese stocks have caused jitters in global stock markets that have rallied strongly in recent months, with the S&P 500 up around 50 percent since March.

If the Chinese economy grows at a slightly slower rate than people were looking for, it'll have some negative overtones for us, said James Meyer, the chief investment officer at Tower Bridge Advisers in West Conshohoken, Pennsylvania.

There's also a psychological impact. Traders were thinking what was good for China was good for the U.S. Now they're looking at it as if China falls, we might as well.

The Dow Jones industrial average <.DJI> dropped 86.46 points, or 0.91 percent, to 9,457.74. The Standard & Poor's 500 Index <.SPX> lost 11.69 points, or 1.14 percent, at 1,017.24. The Nasdaq Composite Index <.IXIC> fell 24.88 points, or 1.23 percent, to 2,003.89.

Financial stocks also fell, following a strong rally last week and some cautious comments from analysts.

Rochdale Securities analyst Richard Bove wrote that in the short term, a reaction to the recent move up in the stocks may develop.

In addition, Barron's recommended profit-taking in Citigroup and said American International Group shares were overpriced after gaining more than 50 percent last week.

Citi was down 4.2 percent at $5.01 while AIG dropped 9.6 percent to $45.43.

The weakness in energy and financial stocks overshadowed the news of two large mergers on Monday.

Walt Disney Co agreed to buy Marvel Entertainment for $4 billion, while Baker Hughes Inc said it would buy BJ Services Co for $5.5 billion.

Marvel shares soared 25.4 percent to $48.45, while BJ Services' stock was up 5.2 percent at $16.23.

Also on Monday, the Institute for Supply Management-Chicago's business barometer rose to 50.0 in August. The level was higher than expected, and was on the dividing line between growth and contraction in the sector.

(Editing by Jan Paschal)