US stocks closed firmly in the red Monday as Greece's political stalemate and Spain's banking problems drove new fears about the strength of the eurozone.
Meanwhile turmoil at JPMorgan Chase over its $2 billion derivatives loss announced last week kept US bank shares under pressure.
The Dow Jones Industrial Average slid 125.25 points, or 0.98 percent, to finish at 12,695.35.
The S&P 500 fell 15.04 (1.11 percent) to 1,338.35, while the tech-rich Nasdaq dropped 31.24 (1.06 percent) to 2,902.58.
"Despite an attempt to showcase its resiliency of late, the uncertainty surrounding Greece's future as a eurozone member and disappointing data out of the eurozone was too heavy a weight for the bulls," Charles Schwab & Co. analysts said.
The main cloud over trade was the continued stalemate in Greece's parliament over forming a new government, elevating worries over whether it will keep up with its massive bailout program or withdraw from the euro. New elections appeared nearly inevitable.
With a dearth of US economic data Monday, Europe's official numbers showing eurozone industrial production fell 0.3 percent in March underlined fears of further weakening in the single-currency area.
European markets closed about two percent lower and the euro slumped to $1.2830, its lowest point since January 18.
JPMorgan Chase lost 3.2 percent after Friday's 9.3 percent rout as the storied Wall Street Bank took investor flak for its $2 billion derivatives trading loss in recent weeks.
The bank announced Monday the "retirement" of the head of the chief investment office, responsible for the loss, amid reports that more heads were to roll. JPMorgan faces shareholders Tuesday at its annual meeting in Tampa, Florida.
Besides JPMorgan, the Dow blue chips' big losers were Bank of America, down 2.7 percent; General Electric, down 2.2 percent; Intel, down 2.2 percent; and Caterpillar, off 2.0 percent.
Yahoo! shares bucked the trend, jumping 2.0 percent, after the resignation Sunday of its chief executive Scott Thompson just months after he joined the company, amid a controversy over his resume and questions about his health.
US bond prices moved higher. The yield on the 10-year Treasury dropped to 1.79 percent from 1.84 percent Friday, while the 30-year slid to 2.95 percent from 3.01 percent.