Stocks came off session lows, but still finished sharply lower Monday, as bank stocks slumped amid ongoing macroeconomic concerns and ahead of a big earnings week.
The Dow Jones Industrial Average tumbled 94.57 points, or 0.76 percent, to end at 12,385.16, clawing back from its intraday low of 12296.23.
Boeing and BofA were the biggest laggards. The blue-chip index is now on pace for its first three-month losing streak since Feb. 2009.
The S&P 500 fell 10.70 points, or 0.81 percent, to close at 1,305.44. The tech-heavy Nasdaq slid 24.69 points, or 0.89 percent, to finish at 2765.11.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped almost 10 percent to trade above 21.
All 10 S&P sectors finished in the red, led by financials and materials.
“Uncertainty has not gone away over the weekend,” said Ryan Detrick, senior technical analyst at Schaeffer's Investment Research. “The markets are focusing on headline news again, and earnings have taken a backseat to what’s been going on.”
Detrick said he expects the S&P to continue trading in the current range.
Banks were under pressure with BofA, Goldman Sachs and JPMorgan hitting fresh 52-week lows. (Read More: Financial Stocks Hit 2011 Low) Citigroup also slipped after Barclays cut its price target on the bank to $55 from $60. BofA and Goldman Sachs are slated to report earnings Tuesday morning.
Italian banks skid across the board, with shares of UniCredit briefly halting earlier, amid investor concerns over the sovereign debt crisis and the cost it could have on the sector.
Tech stocks were also mostly in the red, with the exception of Apple . Analysts from JPMorgan and Baird provided bullish earnings previews for the iPod maker ahead of the report on Tuesday afternoon. JPMorgan raised its earnings estimates on the firm from $5.55 to $6.58.
Sandisk fell after Stifel Nicolaus cut its price target on the chipmaker to $63 from $72. Rivals Micron and Texas Instruments were also lower.
Neftlix slid after Pacific Crest Securities cut their rating on the video-streaming company to "sector perform" from "outperform."
LinkedIn also declined after JPMorgan downgraded their rating on the job-networking site to "neutral" from "overweight."
Meanwhile, Check Point gained after the Internet and network security provider raised its outlook for 2011 after it reported better-than-expected profit due to strong sales.
Also, Halliburton reported a 54 percent jump in profitas a U.S. drilling boom showed no signs of cooling off.
IBM and Mosaic are slated to report after-the-bell.
Throughout the week, approximately half of the Dow and more than 100 companies on the S&P are expected to report.
Meanwhile, News Corp continued to slide as the phone hacking scandal grew. Rebekah Brooks, former chief executive of News Corp's British newspaper arm News International, was released on bail early on Monday after being questioned over the phone-hacking scandal, the Metropolitan police said in a statement on Monday.
Brooks is set to appear before a parliamentary committee in London on Tuesday along with James and Rupert Murdoch.
WebMD plunged more than 25 percent after the healthcare information provider cut its 2011 forecast, citing delays and cancellation of consumer sponsorships. Citi downgraded the firm to "hold" from "buy."
Gold jumped to record highs above $1,600 an ounce, as bought into the metal as a haven from risk. (Read More: Gold to Hit $1,700 By Year End?)Gold miners were among the day's few gainers with AngloGold and Newmont up almost 2 percent each.
Meanwhile, oil prices tumbled with U.S. light, sweet crude slipped $1.31 to settle at $95.93 a barrel and London Brent crude falling below $116.
On the economic front, home builder sentiment rose more than expected in July but still remained near historic lows, according to the National Association of Home Builders.
Volume continued to be light with the consolidated tape of the NYSE at 3.60 billion shares, while 874 million shares changed hands on the floor.
The NAHB/Wells Fargo Housing Market index rose to 15 in July after falling to a nine-month low of 13 in June, the group said in a statement.
However, the homebuilders continued to trade lower including Beazer and Lennar , as the boarder markets fell overall.
With very little progress made over the weekend and no talks scheduled for today, debt negotiations to avert a default have failed to make a breakthrough so far.
European shares hit a four-month closing low, as bank stocks took a fresh beating on the first trading day following a much-hyped capital stress test that failed to dispel fears about the impact of the regional debt crisis.
Coming Up This Week:
TUESDAY: Housing starts, Fed's Hoenig speaks; Earnings from BofA, Coca-Cola, Goldman Sachs, J&J, Wells Fargo, Apple and Yahoo
WEDNESDAY: Weekly mortgage apps, existing home sales, oil inventories; Earnings from Altria, United Tech, Abbott Labs, Blackrock, AmEx, Intel, Qualcomm and Ebay
THURSDAY: Weekly jobless claims, Philadelphia Fed survey, money supply; Earnings from AT&T, Morgan Stanley, Nokia, PepsiCo, Freeport McMoran, Travelers, Mircrosoft, AMD and SanDisk
FRIDAY: No major econ. news expected; Earnings from Caterpillar, GE, McDonald's, Schlumberger, Verizon, Honeywell
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