In a sign that the problem of Europe is still far completed, yields on Italian and Spanish bonds surged, pushing the European Central Bank to buy its debt, while the shares of European banks were under selling pressure.
MF Global Holdings Ltd., futures brokers who make big bets on European sovereign debt, filed Chapter 11 bankruptcy protection the U.S., making it the largest U.S. victims of the crisis the euro zone.
Financial stocks fell sharply. Morgan Stanley, which tend to perform poorly when worries about Europe increased, decreased 8.6%. Losses on Monday marked the reversal of the euphoria over the deal last week with European leaders to stem the debt crisis.
News at the end of the day that Greece asks unexpected referendum on new EU aid package to confuse investors and adds to the uncertainty.
Contributing to the downward pressure, the U.S. dollar surged to a three-month high against the yen as the Japanese government intervened to stop the appreciation of its currency, which hurt the export-based economy.
Surge in energy stocks and the dollar led to natural resource companies fell sharply. S & P energy index fell 4.4% and became the hardest hit sectors.
Despite this decline, the benchmark S & P 500 rose nearly 11% for the month of October and recorded the best monthly percentage rise since December 1991. Nasdaq also rose 11% in October, while the Dow Jones rose 9.5%.
Most of the increase occurred driven by the policy of the European leaders to improve regional bailout and recapitalization.
But despite the gains in October, the S & P 500 flat for so far this year.
The Dow Jones industrial average fell 276.10 points, or 2.26%, to 11,955.01. Standard & Poor's 500 index fell 31.79 points, or 2.47%, to 1,253.30. The Nasdaq Composite lost 52.74 points, or 1.93%, to 2,684.41.
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