NEW YORK (AFP) - Wall Street stocks began a busy week of earnings and economic reports sharply lower in early trade Monday following a plunge in Chinese equity markets.

About 35 minutes into trade, the Dow Jones Industrial Average stood at 17,414.97, down 153.56 points (0.87 per cent).

The broad-based S&P 500 fell 13.79 (0.66 per cent) to 2,065.86, while the tech-rich Nasdaq Composite Index dropped 41.11 (0.81 per cent) to 5,047.52.

US and European equity markets retreated after the Shanghai exchange plummeted 8.48 per cent on fears the Chinese government will pull back on support measures that have stabilized the market the last three weeks.

The US calendar includes a Federal Reserve policy meeting and earnings reports from Facebook, Pfizer and Procter & Gamble.

Allergan rose 5.4 per cent after reaching a deal to sell its generic drug business to Israeli pharmaceutical giant Teva for US$40.5 billion (S$55.5 billion). Teva jumped 10.0 per cent.

Teva said it was abandoning an effort to buy rival Mylan, which sank 13.8 per cent. But Perrigo, which has opposed efforts to be acquired by Mylan, rose 4.1 per cent.

Software and industrial equipment maker company Roper Technologies fell 4.8 per cent as it trimmed its full-year profit forecast from US$6.75-US$6.95 per share to US$6.61-US$6.75, citing weak conditions in the upstream oil and gas business.

Banking shares fell, including Dow member JPMorgan Chase (-1.7 per cent), Bank of America (-1.8 per cent) and Citigroup (-2.0 per cent).

US-listed Chinese companies were weak, with e-commerce giant Alibaba losing 3.2 per cent and online retailer JD.com losing 5.0 per cent.

Bond prices rose. The yield on the 10-year US Treasury fell to 2.22 per cent from 2.26 per cent Friday, while the 30-year declined to 2.92 per cent from 2.96 per cent. Bond prices and yields move inversely.