Stocks fell sharply after a late selloff Monday after a report showed consumer credit rose slightly.
Stocks had zig-zagged throughout the session as the market remained jittery. Industrials, financials and tech were the weakest links.
The Dow Jones Industrial Average lost 115.48, or 1.2 percent, to close at 9,816.49, its lowest close since November 2009.
This came after the Dow slipped below 10,000on Friday and into correction territory (down more than 10 percent from its recent high)after the May jobs report fell well short of expectations, rattling a market already jittery after Hungary warned of a possible default.
The S&P 500shed 1.4 percent, while theNasdaq lost over 2 percent. The CBOE volatility index, widely considered the best gauge of fear in the market, was above 36 at the closing bell.
"You would normally see a bounce following a selloff like we saw on Friday, but the lack of any real direction today shows the market remains unconvinced that all the issues have been worked out," said Alan Gayle, senior investment strategist at RidgeWorth Investments.
Consumer credit rose by $955 millionin April, only the second rise in the past 15 months.
Worries about Europe also nagged at the market as an EU official said Spain and Portugal need to make more cuts and reform measures to fix their economies. This came after Hungary rattled the market last week, warning of a potential default of its own.
One bit of good news on the euro front today: German industrial orders rose more than expectedin April.
The dollar rose against the euro, which fell below $1.19 for the first time in more than four yearsbut recovered most of its losses.
Goldman Sachs slipped as the brokerage was subpoenaed by the FCICafter failing to comply with a request for documents and interviews.
Bank of America shares skidded after Rochdale analyst Dick Bove cut his price target on the stockto $22.80 from $27.50.
Industrial and technology stocks were among the hardest hit as jittery investors moved away from recovery plays. United Technologies and Caterpillar were among the biggest decliners on the Dow.
In tech land, chips took a beating, with Nvidia and Micron Technology both down more than 4 percent. Intel lost more than 3 percent.
A handful of tech giants including Google and eBay had their ratings lowered by brokerages. But Amazon.com was added to Goldman Sachs' "conviction buy" list.
Apple shares slid despite unveiling of the company's latest iPhone. The latest model is less than 10 millimeters thick (about three-eighths of an inch) and has a higher-resolution screen with a front-facing camera, in additon to one in the back. CEO Steve Jobs said called the new device "the biggest leap since the original iPhone."
Meanwhile, shares of Research In Motion fell over 5 percent after an analyst at Paradigm Capital said sales of the BlackBerry slid in the smartphone maker's key North American market in May.
U.S.-traded shares of BP ended lower. The stock had risen earlier after the company made its first significant progresson containing the Gulf oil spill and announced that a second containment system would be available in mid-June.
Shares of other companies involved in the spill, Halliburton and Transocean , also ended lower.
The impact of the government's six-month curb on deepwater drilling is starting to show up: Oceaneering International slashed its full-year forecast.
Oil briefly fell below $70 but settled at $71.44 a barrelwhile gold prices rose slightly, settling at $1,239.30 an ounce .
Shares of gold miners were mostly higher, with Barrick , Newmont and GoldCorp all trading up 2 percent or more.
Bristol-Myers Squibb shares jumped over 6percent to lead the S&P 500 following news over the weekend that its experimental drug for skin cancer had achieved positive results. Also, at least two brokerages raised their ratings for the firm to "buy."
Pfizer's CEO said the company has launched a separate business focused on oncology.
And, shares of Celgene rose over 4 percent after Jefferies raised its rating on the pharma stock to "buy" from "neutral," while Abbott Labs fell after Goldman Sachs cut the medical-devices firm's stock to "neutral" from "buy."
Burger King shares dropped after the fast-food chain
CVS shares skidded after Walgreen said it wouldn't participate in any new drug plans picked up by benefits manager CVS Caremark, saying it favors CVS drugstores over other chains.
On the M&A front, Spanish health-care company Grifolshas agreed to buyU.S.-based Talecris Biotherapeutics, which makes plasma-based protein therapies, for $3.4 billion.
Marsh & McLennan agreed to sell investigations unit Krollto Altegrity in a $1.13 billion all-cash deal.
And Disney will enter into exclusive talks to sell its Miramax film unitto Los Angeles construction magnate Ron Tutor and film financier partner David Bergstein.
Volume was average, with about 1.3 billion shares changing hands on the New York Stock Exchange. Decliners outpaced advancers, nearly 3 to 1.
TUESDAY: Primary & special elections; NFIB small business optimism index; McDonald's May sales data; 3-yr note auction
WEDNESDAY: Weekly mortgage apps; wholesale trade; 10-yr note auction; Fed's beige book; Bernanke speaks; Fed's Lacker speaks; Caterpillar shareholders meeting
THURDSAY: International trade; weekly jobless claims; quarterly services survey; 30-yr bond auction; Treasury budget; Earnings from: Del Monte Foods, National Semiconductor
FRIDAY: Fed's Plosser and Kockerlakota speak; retail sales; consumer sentiment; business inventories; S&P index rebalancing details announced
More From CNBC.com: