Stocks staged a strong comeback from their lows Monday, with the Dow posting a triple-digit recovery, but all three major indexes still finished in the red amid fresh worries over the euro zone.
“Short-term, this is probably a buying opportunity,” said Tyler Vernon, CIO of Biltmore Capital, on CNBC’s “Power Lunch.” “There’s been some really light volume and it’s great that market has come back from these lows. And at the end of the day, people still think that Bernanke will flood medicine if things get worse.”
The Dow Jones Industrial Average fell 101.11 points, or 0.79 percent, to finish at 12,721.46, led by Kraft and Microsoft . The blue-chip index was down almost 240 points at session low.
With the day's drop, the Dow logged its eighth consecutive Monday. The last time the Dow fell eight Mondays in a row was in May 2002.
The S&P 500 slumped 12.14 points, or 0.89 percent, to close at 1,350.52. The Nasdaq dropped 35.15 points, or 1.20 percent, to end at 2,890.15.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended above 18.
All 10 S&P sectors finished in negative territory, led by energy and materials.
“These guys are juggling with dynamite sticks,” said Art Cashin, director of floor operations at UBS Financial Services. “While they talk about what’s the right demeanor for Spain, if people in any of those countries begin a run on their respective banks, it goes out of the hands of the leadership and puts the crisis into the streets. We’re getting very close to that and that’s the real danger here.” (Read More: Busch—Navigating Your Way Through an Ugly Week)
A number of regional governments in Spainwere set to request central government aid, heightening fears that the country may need a full-scale bailout. Spanish bonds yields surged to their highest levels since the euro was created in 1999. Last week, euro zone finance ministers approved terms for a loan of up to 100 billion euros for Madrid to recapitalize its banks.
Regulators in Spain and Italy both instituted temporary short-selling bans to try to curb the heavy selling in European markets. European shares closed sharply lowerand the euro hit a new two-year low against the dollar.
Adding to woes, Spain's economy contracted in the second quarter.
Concerns over Greece also returned amid worries that the IMF may no longer provide financial aid to the debt-ridden nation, according to a report in Germany's Der Spiegel, sparking fears the country could run out of money as early as September. And Greece's Prime Minister Antonis Samaras warned that the country was facing a new “Great Depression.”
Brent crude fell below $103 a barrel, while gold prices dropped almost 1 percent.
JPMorgan rebounded following news that CEO Jamie Dimon bought 500,000 shares last week for $17.1 million. But other financials including Goldman Sachs and Citigroup were lower.
Among earnings, McDonald's dropped after the fast-food giant reported quarterly results that missed expectations. The earnings miss was the Dow component's first since 2004 when it missed estimates by a penny.
Halliburton rebounded after the oilfield services company posted a better-than-expected profit, thanks to higher international drilling activity.
Meanwhile, Hasbro gained after the toymaker reported better-than-expected earnings on better inventory management and market share gains.
Texas Instruments and Baidu are slated to report earnings after the closing bell.
Homebuilders rallied after Goldman Sachs added MDC Holdings to its "conviction buy" list, boosted KBHome to "buy" and Ryland to "neutral." However, NVR was lowered to "sell."
On the M&A front, GenOn Energy surged after NRG Energy said it will buy the power producer for $1.7 billion in stock.
Peet'sCoffee & Tea soared after the specialty coffee roaster and retailer said it struck a deal with Joh. A. Benckiser for about $1 billion.
Canada's Nexen skyrocketed after China's oil producer CNOOC agreed to buy the company in a deal worth about $15 billion.
And RailAmerica jumped after Genesee & Wyoming said it will buy the railroad operator for $1.39 billion in cash.
Wet Seal plunged after the teen retailer fired its CEO Susan McGallawithout naming a replacement amid declining sales.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
TUESDAY: FHFA home price index, Richmond Fed manufacturing index, 2-yr note auction; Earnings from AT&T, DuPont, UPS, UnderArmour, AK Steel, Apple, Aflac, Broadcom
WEDNESDAY: Weekly mortgage apps, new home sales, oil inventories, 5-yr note auction, USDA food prices outlook; Earnings from Arcelor Mittal, Boeing, Bristol-Myers, Caterpillar, ConocoPhillips, Ford, GlaxoSmithKline, PepsiCo, Visa, Symantec, Western Digital, WholeFoods, Zynga
THURSDAY: Durable goods orders, jobless claims, pending home sales, 7-yr note auction, CFTC emergency meeting; Earnings from AstraZeneca, ExxonMobil, 3M, Credit Suisse, Dow Chemical, Pulte, Sprint, Amazon.com, Amgen, Facebook, Expedia, Starbucks
FRIDAY: GDP, consumer sentiment, summer Olympics start, 100 days to election; Earnings from Chevron, Merck, Barclays, DR Horton
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