After failing to sustain an afternoon recovery attempt, stocks moved back to the downside going into the close of trading on Tuesday. The major averages all ended the day firmly in negative territory, partly offsetting the standout gains posted in the previous session.

While profit taking contributed to some weakness in the markets, selling pressure remained relatively subdued, helping the major averages to hold onto the bulk of Monday's gains.

For much of the session, traders were keeping a close eye on Capitol Hill, with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner testifying before the House Financial Services Committee.

During his testimony, Geithner said the near-collapse of AIG (AIG) highlights broad failures of the U.S. financial system, and he pledged to work on improving the regulatory structure in order to prevent another similar situation.

The major averages pulled back to new lows for the session in late-day trading, although they ended the session just off their worst levels. The Dow closed down 115.65 points or 1.5 percent at 7,660.21, the Nasdaq closed down 37.34 points or 2.4 percent at 1,518.43 and the S&P 500 closed down 16.58 points or 2 percent at 806.34.

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