This came after market buzz on Tuesday that Spain might be next to need a bailout and escalating rioting in Greece over tough austerity measures.
Three people were killedin Greece after rioters set a building on fire, trapping the people inside.
The European debt crisis likely won't end until the euro collapses, taking the entire European Union with it, Dennis Gartman, a hedge-fund manager and author of "The Gartman Letter," said.
Bank stocks rebounded as members of the Financial Crisis Inquiry Commission grilled the former executives of Bear Stearns over why the bank was so vulnerable that it became the first major collapse of the crisis in March of 2008.
"The market's loss of confidence, even though it was unjustified and irrational, became a self-fulfilling prophecy," Former CEO James Cayne said at the hearing. "Considering the severity and unprecedented nature of the turmoil in the market, I do not believe there were any reasonable steps we could have taken, short of selling the firm, to prevent the collapse that ultimately occurred."
- Watch a live-streaming video of the hearing
Travelers and JPMorgan were among the gainers on the Dow. Bank of America also rose, while Citigroup fell.
On the earnings front, Time Warner beat expectations this morning, reporting that ad revenue grewduring the quarter.
This came after News Corp. blew past earnings expectations due in large part to the success of "Avatar," while Viacommissed its revenue target.
Garmin shares tumbled more than 10 percent after the GPS maker reported a profit that came in well below estimatesas investors flagged a sharper-than-expected downward spiral in the portable navigation device market.
The dollar continued to riseagainst the euro amid the European debt worries. Oil fell to around $80 a barrel after a report showed inventories rose by 2.8 million barrels last week. Gold rebounded to around $1,174 an ounce.
Shares of oil giants such as ExxonMobil , Chevron and ConocoPhillips dropped.
Investors remained divided on whether recent falls in the stock market signaled the start of a longer-term selloff or just a brief setback.
Recent losses have ratcheted up the correction debate: Some say the correction has already started, while others say it isn't isn't likely to start until June or July.
The markets are likely to see a seasonal summer pullback of 5 to 7 percent, said Marc Pado, U.S. market strategist at Cantor Fitzgerald. However, he said corporations will bounce back as they have healthy balance sheets and have been bracing for a "second wave of economic weakness."
Pado said investors should look into the defensive sectors including pharma, health care and some of the consumer nondurable areas like food, tobacco and telecom. Meanwhile, he advised against large-cap multinational sectors — mainly the big industrial exporters.
A couple of U.S. employment reports showed more jobs added and fewer layoffs but both still disappointed the market. An ADP report showed the economy added 32,000 jobsin April, while outplacement firm Challenger, Gray & Christmas said planned layoffs dropped to a four-year low.
Both reports are closely watched ahead of the government's jobs report, due out on Friday. Right now, economists expect to see 175,000 jobs were added to nonfarm payrolls in April, according to the latest Reuters survey.
In the day's other economic news: mortgage applications rose to a seven-month high and the ISM services index held steady at 55.4 in April from March.
Intel unveils a new version of its Atom chip, featuring more efficient power consumption and cheaper cost.
Nokia and Microsoft unveil their first software collaborationaimed at cutting into the market share enjoyed by Research-In-Motion's BlackBerry. This comes as Verizon Wireless begins selling Microsoft's "Kin" smartphone Wednesday.
Google is expected to start selling digital books in the next two months through its "Google Editions" e-book store. However, some experts are concerned that Google will have a difficult time competing against Amazon, Barnes & Noble and Apple’s e-reader devices.
Retailers are scheduled to report their monthly sales numbers on Thursday. Analysts are expecting to see sales rose 1.6 percent in April, compared with a drop of 2.7 percent last year, according to the latest Thomson Reuters survey. An increase would mark the eighth consecutive month of rising salesafter a year's worth of declines.
Shares of retailers such as Macy's, Costco and Gap were higher.
Still to Come:
WEDNESDAY: Earnings from CBS and Symantec
THURSDAY: Chain-store sales; ECB announcement; weekly jobless claims; productivity; Bernanke speaks; earnings from Activision, Kraft
FRIDAY: Goldman Sachs shareholders meeting; April jobs report; Fed's Plosser speaks; consumer credit; earnings from Liberty Media
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