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The blue chips trimmed down triple-digit losses in afternoon trading on Monday as traders paid close attention to developments in Europe.

Today's Markets

As of 3:00 p.m. ET, the Dow Jones Industrial Average fell 24.6 points, or 0.19%, to 12635, the S&P 500 dipped 5.2 points, or 0.4%, to 1311 and the Nasdaq Composite skidded 6.9 points, or 0.25%, to 2810.

The fragile situation in Europe fell into the background to some extent last week as market participants had a deluge of corporate and economic news to parse through. However, with the European Union meeting beginning on Monday, the continent's debt woes have come squarely back into focus.

The EU leaders are expected to discuss fiscal ties aimed at staving off a repeat of the debt crisis and the bloc's permanent rescue fund, called the European Stability Mechanism. However, talks between Greece and its private creditors that have dragged on for weeks threatened to overshadow the talks.

"Everyone was thinking we would have some kind of deal by the start of the summit," Alpari Senior Market Analyst James Hughes said in an interview with FOX Business on Monday.

The Institute of International Finance, which represents the bondholders, wrote in an e-mail on Saturday it expects talks on the voluntary debt exchange to conclude this week, although it did not provide a more specific timeline.

The deal is crucial for Greece for two reasons: First, some bondholders will voluntarily take a 50% haircut on the face value of the bonds, which helps the country reduce its enormous debt burden. Second, the European Union and International Monetary Fund, which have both pledged to provide a second bailout to keep the country from defaulting on its debt, have required significant private-sector involvement to allow the rescue to proceed. A failure, analysts have said, could result in a chaotic default that could threaten Europe's financial system and stymie a fragile economic recovery.

The euro slid 0.75% to $1.3121, while the U.S. dollar rose 0.45% against a basket of six world currencies.

On the U.S. front, data released by the Commerce Department on Monday showed personal income growing at the quickest pace since March, coupled with the weakest consumer spending increase since June. Income climbed at 0.5% in December from the month prior, topping expectations of a 0.4% gain. Meanwhile, spending was flat for the month, compared with expectations of a 0.1% rise.

The week is set to be a busy one from a data perspective, with several key releases throughout the week, capping with the important monthly employment report from the Labor Department.

Commodities markets were mostly to the downside, tracking a stronger greenback. The benchmark crude oil contract traded in New York fell 78 cents, or 0.78%, to $98.78 a barrel. Wholesale RBOB gasoline dropped 1.9% to $2.871 a gallon.

In metals, gold fell $1, or 0.06%, to $1,734 a troy ounce.

Corporate News

Pep Boys (NYSE:PBY) unveiled an $804 million deal to be taken private by the Gore Group in a transaction that values the retail auto-parts and service chain at a 24% premium.

Foreign Markets

European blue chips slid 1.3%, the English FTSE 100 fell 1.1% to 5,671 and the German DAX slipped 1% to 6,444.

In Asia, the Japanese Nikkei 225 dipped 0.54% to 8,793 and the Chinese Hang Seng sold off by 1.7% to 20,160.