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Stocks Hammered by Eurozone Worries

The Commerce Department reported Monday the U.S. new-home sales rose more than expected in May to a seasonally adjusted annual rate of 369,000 -- the best levels going back to April 2010.

This was also 7.6% above the April rate of 343,000.

Economists surveyed by Thomson Reuters had expected a rise to a seasonally adjusted annual rate of 346,000.

Wall Street though was more concerned with the eurozone summit set to take place in Brussels on Thursday and Friday with the sell-off illustrating how little confidence there is that the meeting will yield a concrete plan to address the region's mounting problems.

" European leaders have their work cut out for them," said Ryan Detrick, senior technical strategist at Schaeffer's. "Germany is getting fed up with Greece wanting a bailout, but not wanting to make big sacrifices. At the same time, Spain has accepted the bailout, but the major concern is could Italy be next? They need to do whatever they can to instill some confidence in their plans at this summit, or things could get ugly later this week."

The realization, said Detrick, that the same European issues have not gone away is what's hurting the markets Monday.

"The only question is will German Chancellor Angela Merkel blink?," said Michael Gayed, chief investment strategist at Pension Partners.

"Will she ease on the rigidity towards handling the Eurozone crisis, or stay the course, which markets appear to not want her to do," asked Gayed. "Other than that, the summit most likely is a non-event," said Gayed.

Gayed attributes some of Monday's selloff to a "withdrawal" from the drug of aggressive Fed stimulus.

The FTSE in London dropped1.14% and the DAX in Germany declined by 2.09%. Spain confirmed Monday that it has officially requested European financial support of up to €100 billion ($125 billion) for its troubled banks. It said that the final amount will be set at a later date and should more than sufficiently cover all the banks' needs.

"Spain finally officially asked for help for their banks and although this isn't a shocker, it is another harsh reminder that the reality is things might get worse before they get better," said Detrick.

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