Updated from 4:17 p.m. EDT

Stocks in New York closed above their worst levels of the session Monday, but the major averages still ended sharply lower as renewed worries swirled around the health of the automaking and financial-services industries.

The Dow Jones Industrial Average dropped 254.16 points, or 3.3%, to 7522.02, and the S&P 500 lost 28.41 points, or 3.5%, to 787.53. The Nasdaq Composite fell 43.40 points, or 2.8%, to 1501.80.

Industrials and financials were hard hit on the Dow , with Alcoa ( AA) and Caterpillar ( CAT) down 14.2% and 9.3%, respectively. Bank of America ( BAC) lost 17.9%, and Citigroup ( C) fell 11.8%.

One of the worst performers in the market was General Motors ( GM), which tumbled 25.4% to $2.70 after the Obama administration said neither GM nor Chrysler have submitted acceptable restructuring plans and that at this point they need to do more to get additional government aid.

As a result, GM CEO Rick Wagoner was forced out from the company over the weekend.

President Obama said " using the bankruptcy code as a tool" with the backing of the U.S. government may be a solution. The president reassured car buyers that the government will stand behind the warranties on cars made by the shaky automakers.

Meanwhile, government officials said Chrysler cannot function as an independent company under its current plan, and they gave it 30 days to complete a proposed partnership with Italian automaker Fiat. Washington will offer up to $6 billion to the companies if they can negotiate a deal before the deadline.

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