Stocks fell more than 1 percent on Monday as renewed anxiety over Europe's economy and the region's debt crisis spurred profit-taking, while Wal-Mart weighed on the Dow after a report it stymied a probe into bribery allegations.
The euro zone's business slump deepened at a far faster pace than expected in April as European factories had their worst month since June 2009.
In addition, the Netherlands government failed to agree on budget cuts over the weekend, making elections in the core euro zone member almost unavoidable. The developments cast doubt on the country's support for future euro zone measures.
Europe is driving the boat right now, and there's no reason to think that investor anxiety will dissipate any time soon, said Joe Cogan, vice president of international equities at Topeka Capital Markets in New York. In addition, the market has been due for a pullback, and I think we could see another 2 to 3 percent of downside before investors come back in the market.
Europe's debt crisis has been a major headwind for equities as investors worried it may affect growth and corporate profits. While the S&P snapped a 2-week string of losses on Friday, it is down about 4 percent from a closing high in early April.
The Dow Jones industrial average <.DJI> slid 162.75 points, or 1.25 percent, at 12,866.51. The Standard & Poor's 500 Index <.SPX> was down 17.82 points, or 1.29 percent, at 1,360.71. The Nasdaq Composite Index <.IXIC> tumbled 44.56 points, or 1.49 percent, at 2,955.89.
Wal-Mart Stores Inc
On the upside, both Xerox Corp
So far, earnings have been solid, with more than 80 percent of S&P 500 companies topping consensus profit estimates.
While the results were enough to lift equities last week, many analysts said Wall Street was in a tug of war between corporate results and geopolitical uncertainties from abroad.
(Editing by Jeffrey Benkoe)