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The markets trimmed heavy losses, but remained stuck in the red, as traders mulled developments on Europe's sovereign debt crisis.
As of 1:30 p.m. ET, the Dow Jones Industrial Average dipped 116 points, or 1.1%, to 10,874, the S&P 500 sunk 11.9 points, or 1%, to 1,142 and the Nasdaq Composite fell 13.4 points, or 0.54%, to 2,455.
The markets have struggled over the last several weeks, with the Dow plummeting 13.3% over the period, and tumbling 2.7% on Friday alone.
Fears over Europe's sovereign debt crisis have swelled in recent months as highly indebted countries like Greece and Italy have struggled to pay back lenders. Greece, in fact, has needed two enormous rescue packages to stave off a default on its sovereign debt.
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However, there are fresh concerns Monday that political tensions across the European Union, particularly in Germany, Europe's largest economy, may hamper the payout of the next aid tranche. The EU and International Monetary Fund have pushed for substantial deficit reduction, and deep austerity measures, in exchange for the rescue, which have been highly unpopular among Greek citizens. The Mediterranean nation is also in a steeper-than-expected recession, potentially heightening the country's fiscal challenges.
Greece's cabinet did agree to levy a new $2.7 billion property tax to help cover the shortfall, however, the country presently only has enough cash to pay its debts through October, according to a report by Reuters.
French banks Societe Generale, BNP Paribas and Credit Agricole nose dived as much as 10% on a report saying Moody's plans on slicing their rating as a result of their heavy exposure to Greek sovereign debt. The Euro Stoxx 50 recently plunged 4.1%, with French equity markets taking some of the heaviest losses.
Traders across the world raced to the safety of U.S. Treasuries, pushing the yield on the benchmark 10-year note to a record low of 1.879%, before it came back slightly. The German bund, which is a safe-haven asset on that side of the Atlantic, also traded at a record low. Volatility has also been quite high in recent sessions as traders have grappled with a slew of economic and euro-zone developments.
On the corporate front, Bank of America (BAC) revealed the details of its new strategy aimed at making the biggest U.S. bank by assets more lean. The strategy, which involves shedding 30,000 jobs over the "next few years," is expected to save the company $5 billion by 2014.
The euro traded higher 0.46% against the U.S. dollar, while the greenback fell 0.05% against a basket of world currencies.
Energy markets were mixed. Light, sweet crude rose $1.20, or 1.2%, to $88.30 a barrel. Wholesale RBOB gasoline dipped 1 cent, or 2.5%, $2.76 a gallon.
In metals, Gold fell $16.40, or 0.89%, to $1,843 a troy ounce.
The English FTSE 100 tumbled 1.6% to 5,085, the French CAC 40 plunged 4% to 2,854 and the German DAX sunk 2.3% to 5,072.
In Asia, the Japanese Nikkei 225 slumped 2.3% to 8,536 and the Chinese Hang Seng fell 4.2% to 19,031.