A previous version of this article incorrectly spelled the name of Prudential strategist Quincy Krosby in a subsequent reference.

U.S. equity benchmarks closed down Monday, but off session lows, amid concerns over growing geopolitical tensions which have helped to refocus investors’ attention on stock prices that have gotten rich by some measures. The downturn for stocks comes as North Korea tested four ballistic missiles off its east coast early Monday, Seoul time.

The Dow Jones Industrial Average DJIA, +0.13% finished down 51.37 points, or 0.2%, at 20,954.34, its first close below 21,000 since clearing that milestone on Wednesday. Shares of Travelers Cos. TRV, +0.90% and J.P. Morgan Chase & Co. JPM, +0.42% led decliners. Earlier, the average traded down by as many as 93 points. Currently, the blue-chip average is coming off a string of records, as well as its fourth consecutive weekly gain.

The S&P 500 index SPX, -0.46% declined 7.81 points, or 0.3%, to finish at 2,375.31, with 10 of the 11 primary S&P 500 sectors down on the day. Financials, by far the biggest postelection gainer, fell 0.6%, while materials shares finished down 0.7%. The energy sector was the only gainer, with a 0.3% rise. Earlier in the session, the index was down by as many as 15 points. The benchmark is coming off a lengthy streak of its own, having advanced for six straight weeks.

The Nasdaq Composite Index COMP, -1.25% finished down 21.58 points, or 0.4%, at 5,849.17, overcoming an earlier 43-point deficit.

Stocks have been on a tear of late, and last week the S&P 500 posted its biggest one-day advance since November. Recent gains have come on hopes that President Donald Trump would soon announce economic policies on taxes and deregulation that would accelerate economic growth and boost corporate profits. Equities have rallied to repeated records on those hopes, but analysts say that details on these policies need to be released soon in order for investors to gauge whether the advance is justified by the legislation, especially given that valuations are, by some metrics, at multiyear highs.

Due to the modest nature of Monday’s pullback, Quincy Krosby, market strategist at Prudential Financial, said markets are just being cautious and there’s some profit-taking in play. Plus, Krosby said the market is still digesting Federal Reserve Chairwoman Janet Yellen’s clearest indication to date that a March rate increase is a real possibility next week. The probability of a March rate increase now stands at 86%, up from about 30% this time last week, according to CME Group’s FedWatch tool.

Also, congressional Republicans are expected to unveil their proposed replacement to the Affordable Care Act sometime this week.

“The market is waiting to see the specifics of that, its clarity, and how it’s going to be implemented,” Krosby said.

“We’ve seen a very large rally in the highest-risk components of the equity market since the election, and we’re seeing a reversal of that trade today. The good news over fiscal policy got priced in very quickly, and the market is now trying to figure out what comes next,” said Kevin Caron, portfolio manager at Stifel Nicolaus & Co.

Over the medium term, pro-growth policy reforms from the current U.S. administration and “solid fundamentals” should keep equity values elevated, said Dubravko Lakos-Bujas, head of U.S. equity strategy at J.P. Morgan Chase & Co., in a note to clients published Monday.

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“Particularly, [the North Koreans] are testing the Trump administration and the Chinese more, so the selloff right now is fairly calm and orderly,” said Prudential’s Krosby.

While Wall Street showed little direct impact from the North Korean missile tests, the event was the latest source of political uncertainty for a market that has also grappled with populist movements in Europe and Trump’s unsubstantiated claim that former President Barack Obama had initiated a plot to tap the phones at Trump Tower in the months leading up to Election Day.

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Selloff chatter continues: Meanwhile, the market is approaching the eighth anniversary of the Financial Crisis bottom. As the S&P 500 has more than tripled since that low, analysts and investors continue to debate whether equities are headed for a correction of sorts.

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Interviews with more than a dozen money managers in the past week by the New York Times DealBook, found that nine of them expect at least a modest decline for stocks in the near future.

See:MarketWatch’s economic calendar

Read:There is a low bar on jobs growth for Fed to hike rates

Trump, without evidence, accuses Obama of wiretapping him

Stocks to watch: Shares of General Motors Co. GM, +0.66% closed down 0.8% after the auto maker said it would sell its unprofitable European unit, including Opel and Vauxhall, in a $2.3 billion deal. GM said it would take a related accounting charge of $4 billion to $4.5 billion.

Airline stocks slid after Delta Air Lines Inc. DAL, +3.16% forecast lower operating margins and higher costs for the quarter at an investor conference. Shares of Delta finished down 2.6%, United Continental Holding Inc. UAL, +4.07% shares declined 3.2%, American Airlines Group Inc. AAL, +5.02% shares shed 3.2%, Southwest Airlines Co. LUV, +3.66% fell 2.2%, and Alaska Air Group Inc. ALK, +2.22% shares declined 2.3%.

Deutsche Bank AG DBK, -0.71% DB, +2.08% U.S.-listed shares fell 3.8% on news of an 8 billion euro ($8.5 billion) rights issue.

The first case of avian influenza, or bird flu, to strike a commercial poultry flock in more than a year was discovered on a Tennessee chicken farm affiliated with Tyson Foods Inc. TSN, -0.06% , government and company officials confirmed Sunday. The U.S. Department of Agriculture said there is no risk to consumers. Shares of Tyson lost 2.5%.

Nvidia Corp. NVDA, -3.66% shares briefly moved into bear market territory and closed down 0.8%.

Other markets:European stock markets SXXP, -0.60% finished lower, led by losses for the German DAX index DAX, -0.59% as Deutsche Bank tumbled. In Asia ADOW, -1.22% , markets largely shrugged off North Korea’s missiles tests, with the Nikkei 225 index NIK, -0.66% slipping 0.5%, and South Korea’s Kospi 180721, -1.22% finishing up 0.1%.

The Shanghai Composite Index SHCOMP, -0.41% gained 0.5% after Chinese Premier Li Keqiang said the country’s GDP growth target for the year would be “around” 6.5%, versus the stated 2016 goal of between 6.5% and 7%.

The yen did gain some strength on Monday, with the dollar USDJPY, -0.19% last trading at ¥113.87, while the U.S. Dollar Index DXY, -0.02% was up 0.1%. Gold US:GCJ7 settled down less than 0.1% at $1,225.50 an ounce.

Oil prices US:CLJ7 settled down 0.2% at $53.20 a barrel after Friday’s data from Baker Hughes Inc. US:BHI showed another rise in the U.S. rig count.

—Barbara Kollmeyer in Madrid contributed to this article