Stocks eased losses in the final hour of trading, although remained lower, as tech stocks fell particularly hard amid high oil prices and continued turmoil in the Middle East.
TheDow Jones Industrial Average fell more than 65 points as buyers stepped in during the last hour of trading. The Dow had risen as much as 70 points early in the session, and fallen more than 128.
Among Dow components, Alcoa , Intel and Disney slid, while McDonald's and 3M gained.
The S&P 500 fell 0.70 percent, while the Nasdaq sank more than 1 percent. The The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 20.
Most key S&P 500 sectors fell, led by materials, technology and health care.
Oil prices set the tone for the market again. Prices initially rose to new 2-½-year highs on concerns that civil war was brewing in Libya, then eased amid a report, citing unnamed sources, that a pan-Arab newspaper that Muammar Gaddafi is making efforts to secure his departure from the country. U.S. officials, however, told NBC news the report can't be confirmed and is "unlikely" considering the situation on the ground.
London Brent crude fell 0.80 percent to $115.04, while U.S. light, sweet crude settled at $105.44 a barrel Monday after nearly reaching $107 earlier in the session. Gold, meanwhile, rose to $1,434 an ounceon Middle East concerns.
"All focus is on the Middle East and crude, and how that will impact the economy," said Daniel McMahon, director of equity trading at Raymond James. Every $10 hike in the price of a barrel of oil takes 25 to 50 basis points off gross domestic product on an annualized basis, McMahon said. The question for traders is, "will that snuff out the modest economic recovery we’ve all been enjoying."
Stocks should remain "range bound," until there is more clarity over the direction of oil prices, McMahon added.
Natural gas stocks were among the best performers among the energy stocks. Piedmont Natural Gas , New Jersey Resources and Vectren were the best performers.
Tech stocks led the market lower on Monday, triggered by semiconductor stocks that were hit hard after Wells Fargo downgraded the sector to "market weight" from "overweight." The brokerage doesn't dislike the sector, but sees many of the stocks as overvalued.
An exception was Intel, which Wells Fargo named a "top pick," but still sank on Monday. Others given an "outperform" rating also fell: Qualcomm, LinearTechnology, Analog Devices, Xilinx and Altera.The iShares Semiconductor ETF index fell nearly 3 percent.
The biggest opportunity presented by today's sell-off are in Intel and Qualcomm, David Wong, the Wells Fargo analyst who downgraded the sector, said on CNBC Monday.
"These are stocks with particularly strong fundamentals," Wong said. "Intel has recovered nicely from its glitch in its Sandy Bridge chip set. I think it’s poised to gain this year and also benefit from strength in the server end market."
"Qualcomm is an excellent tablet and smartphone play," Wong added. (Read more: Street Recklessly Selling Chip Stocks?)
Ciena also sank after the communications equipment maker forecast disappointing second-quarter sales. The results also hurt JDS Uniphase , another communications equipment maker.