U.S. stocks tumbled on Monday as growing fears of a Greek debt default prompted investors to sell risky assets and put an end to a week-long rally on Wall Street.
Energy and financial stocks were the top decliners. The S&P energy sector index <.GSPE> was off 2.8 percent as oil prices fell 2 percent, weighed down by a stronger dollar.
The financial sector index <.GSPF> lost 3.3 percent following a steep decline in European banks. Investors were disappointed by the outcome of U.S. and euro zone leaders' efforts last week to avoid a default by debt-stricken Greece.
We were not only overbought but we were 'over-hoped,' said Karl Mills, president of Jurika, Mills & Keifer Investment Partners, in Oakland, California.
People went into the weekend in hopes that (Treasury Secretary Timothy) Geithner's visit to Europe would bring more clarity, but no positive move came out and we are back with dealing with European problems, Mills said.
The Dow Jones industrial average <.DJI> was down 195.76 points, or 1.70 percent, at 11,313.33. The Standard & Poor's 500 Index <.SPX> was down 20.42 points, or 1.68 percent, at 1,195.59. The Nasdaq Composite Index <.IXIC> was down 27.84 points, or 1.06 percent, at 2,594.47.
At meetings on Saturday, European Union finance ministers broke no new ground in dealing with the sovereign debt crisis and made no decision on whether to give more firepower to the $607 billion bailout fund.
Investors bought government debt after the Greek prime minister, George Papandreou, canceled a visit to the United States. On Monday EU and International Monetary Fund inspectors will hold a conference call with Finance Minister Evangelos Venizelos to hear how Greece will plug this year's budget shortfall.
U.S.-listed shares of a Swiss bank UBS
Helping to limit the Nasdaq's losses, Netflix Inc
U.S.-listed shares of Research In Motion
Shares of diversified manufacturer Tyco International
Investors cheered the move on Monday amid speculation that smaller chunks of Tyco would become acquisition targets.
President Barack Obama on Monday called on U.S. lawmakers to pass his jobs proposal and take up his plan to slash up to $3 trillion from the deficit over a decade.
Republicans, who control the U.S. House of Representatives, are firmly against any tax hikes to raise revenues, so the plan is not seen moving forward in its current form.
(Additional reporting by Claire Sibonney; Editing by Kenneth Barry)