Bank of America (BAC, Fortune 500) and Hewlett-Packard (HPQ,Fortune 500) were the worst performers on the Dow, while Wal-Mart (WMT, Fortune 500) bucked the trend. Shares of the world's largest retailer rose 1.3%.
The selloff was driven by doubts that EU leaders will come up with a "game-changer" at a two-day meeting that starts Thursday.
"The eurozone crisis is deepening as investors have little faith in a culmination of any sort of agreement on how to deal with the situation at this week's EU summit," said Angus Campbell, a market analyst at London-based Capital Spreads, in a note to clients.
The leaders are expected to discuss steps towards a
so-called banking union and other
measures to boost economic activity. But investors are skeptical that
"Investors have all too often seen these summits before
ending with little in the way of a resolution," said
"If you didn't really want to buy Spanish bonds, you
certainly don't want to after this formal request," said Elisabeth Afseth,
a fixed income analyst with Investec in
U.S. stocks closed higher Friday, one day after fears of slow growth and bank downgrades sent them spiraling downward.
Economy: New home sales for May rose at a seasonally adjusted annual rate 369,000, according to government data. Sales were expected to come in at 350,000, according to a survey of analysts by Briefing.com, up from 343,000 in the prior month.
Shares of Parsippany, N.J.-based Watson Pharmaceuticals (WPI) rose on news that U.S. drug regulators gave it permission to produce generic forms of Adderall XR. Until now, Ireland's Shire (SHPGY) has been the only producer of the drug, administered to those diagnosed with attention deficit hyperactivity disorder.
Shares of JC Penney (JCP, Fortune 500) fell amid ongoing worries about the retailer's management. Last week, the company announced that its president was stepping down after less than nine months on the job.
Chesapeake Energy (CHK, Fortune 500) faced continued speculation that the natural gas producer is a takeover target. Its stock plunged 8% after a Reuters investigation revealed that the company and its competitors artificially held down land prices.
Oil for August delivery fell 55 cents to end at $79.21 a barrel.
Gold futures for August delivery rose $21.50 to settle at $1,588.40 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 1.62% from 1.67% late Friday.