Stocks closed the day with an aggressive selloff as fears over both Europe and the stability of US banks trumped good news out of the housing market.
Energy stocks joined the misery and helped break the trend of strong Mondays even during a correction that has sent the major averages more than 10 percent lower.
Worries over European debt and the global problems it could cause continued to dog the markets, which fought a losing battle during the course of a seesaw session that saw stocks fall nearly 1 percent at the open, try to recover, but then recede as the day progressed.
Tech stocks had held stubbornly positive through the session, with sector leaders Apple and Google setting the pace before even the Nasdaq turned negative.
Housing stocks, meanwhile, suffered as housing sales for April were much stronger than expected but analysts remained skeptical of what would happen now that the government tax credit was going away.
Existing home sales gained 7.5 percent, though inventory figures showed an 8.4-month supply of homes still on the market.
Homebuilder stocks were the most volatile of the day. The SPDR S&P Homebuilders exchange-traded fund gained more than 1.5 percent at one point before pulling back. Hovnanian was up more than 5 percent at one point.
Telecoms and health care were the best of the S&P 500, while financials and energy were the broad index's biggest drags even as oil prices rose.
SprintNextel was the biggest gainer on the S&P and spurred the telecom surge after Goldman Sachs upgraded the company to "buy" from "neutral."
On the Dow, Home Depot was the only positive in the bluechips, while AT&T, General Electric and JPMorgan Chase were among the biggest drags.
Monday had been a good day for the market so far in 2010, with the Dow gaining a total of 1,076 points on the first day of the trading week. But even that trend couldn't hold up.
Volume actually was a bit on the light side and breadth eventually favored losers over gainers by a nearly 2 to 1 margin. Total volume was around 5 billion shares, with trading on the New York Stock Exchange hitting about 1.27 billion.
Despite the vacillating indexes, the CBOE Volatility Index fell below 40 on the day and remained negative.
Some analysts were telling investors to capitalize on the market correction, though the lesson didn't stick in the last half hour of trading.
"Times like this make it clear that the equity risk premium is no free lunch and volatility is gut wrenching even for the most long-term of investors," Bank of America-Merrill Lynch said in a note to clients. "We believe the best way to feel better during a correction is to buy some shares."
BofA-Merrill advised clients to make broad-based buys across the S&P, but mega-cap stocks, particularly those in the tech space, were the most attractive in terms of valuation.
The latest European pressure came as the Bank of Spain seized troubled CajaSurwith 500 million euro ($624 million) in funding to keep it solvent.