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While stocks moved sharply lower in early trading on Monday amid renewed concerns about the financial situation in Europe, a substantial recovery attempt seen late in the trading day helped to lift the major averages well off their worst levels of the day.

After falling by over 250 points early on, the Dow closed down 108.08 points or 0.9 percent at 2,612.83. The tech-heavy Nasdaq briefly peeked into positive territory in late-day trading but still closed down 9.48 points or 0.4 percent at 2,612.83, while the S&P 500 fell 11.92 points or 1 percent to 1,204.09.

The sharp sell-off seen early in the trading day came as U.S. stocks followed the global markets lower, as the concerns about Europe inspired traders to cash in on the strength that was seen last week.

Much of the selling pressure stemmed from news that a weekend meeting of European officials failed to make progress on dealing with Greece's mountain of debt, raising concerns that the debt-plagued nation could be forced to default.

Disappointing housing data may also have contributed to the early weakness, with a report from the National Association of Home Builders showing an unexpected deterioration in homebuilder confidence in the month of September.

The report showed that the NAHB/Wells Fargo Housing Market Index dropped to 14 in September from 15 in August. The modest drop surprised economists, who had expected the index to remain unchanged.

However, stocks showed a notable move back to the upside after Greece described a conference call between Finance Minister Evangelos Venizelos and officials from the European Commission, the International Monetary Fund and the European Central Bank as "productive and substantive."

Greece said that the conference call, during which the officials discussed further measures the country must take to receive additional aid, would resume on Tuesday.

Traders were also digesting a budget deficit reduction proposal offered by President Barack Obama that includes $1.5 trillion in tax increases mostly targeting the wealthy.

Obama sent the plan to the budget super committee, calling for a balanced approach to deficit reduction and saying that the plan would produce net savings of more than $3 trillion over the next decade.

Sector News

Despite the recovery attempt seen in late-day trading, financial stocks still saw substantial weakness on the day amid lingering concerns about the global economic outlook.

Brokerage and banking stocks both saw considerable weakness, with the NYSE Arca Broker/Dealer Index and the KBW Bank Index falling by 3.1 percent and 2.8 percent, respectively. Morgan Stanley (MS) turned in one of the sector's worst performances, sliding by 7.9 percent

Significant weakness was also visible among railroad stocks, as reflected by the 3 percent loss posted by the Dow Jones Railroads Index. The loss by the index came after it closed higher in each of the four previous sessions.

Steel, electronic storage, and commercial real estate stocks also posted notable losses on the day but ended the session well off their worst levels.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw considerable weakness on Monday, although the Japanese markets were closed for a public holiday. Hong Kong's Hang Seng Index tumbled by 2.8 percent, while Australia's All Ordinaries Index fell by 1.6 percent.

The major European markets also came under significant selling pressure on the day. The U.K.'s FTSE 100 Index slid by 2 percent, while the German DAX Index and the French CAC 40 Index plunged by 2.8 percent and 3 percent, respectively.

In the bond market, treasuries saw considerable strength after showing a notable move to the downside last week. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 13.6 basis points to 1.94 percent.

Looking Ahead

While any further developments in Europe will likely drive trading on Tuesday, traders may also keep an eye on the Commerce Department's report on housing starts in the month of August. Economists expect housing starts to slip to an annual rate of 592,000 from 604,000 in July.