NEW YORK (TheStreet) -- U.S. stocks finished with deep losses Monday as questions about Greece's ability to live up to austerity measures and soaring Spanish bond yields reignited investor frustration about the pace of progress in the eurozone.

Worries about China's economic growth were also in the mix after a member of the People's Bank of China reportedly forecast a slowdown in gross domestic product this quarter. Buyers did come into the market as the day waned, helping all three major U.S. equity indices recover from their worst levels of the day.

The Dow Jones Industrial Average lost 101 points, or 0.79%, to closed at 12,721.46, bouncing nearly 140 points off a session low of 12,583.

Within the Dow, 23 of the index's 30 components slumped, led by McDonald's ( MCD), Microsoft ( MSFT), Cisco ( CSCO) and Kraft Foods ( KFT).

Shares of McDonald's fell 2.8% after the company missed on the top line in its latest quarter, citing a slowdown in the global economy and "persistent" economic headwinds.

Cisco announced a restructuring late in Monday's session, saying it's eliminating 2% of its workforce, or 1300 jobs. The networking giant's stock gave back 1.8% on the day.

Dow gainers included JPMorgan ( JPM), General Electric ( GE) and Caterpillar ( CAT).

The S&P 500 dropped 12 points, or 0.89%, to settle at 1350.52. The session low was 1337. Every sector in the broad market declined with basic materials, energy, technology and transportation enduring the steepest selling.

The Nasdaq dropped 35 points, or 1.20%, to close at 2890. The tech-heavy index ran as low as 2853 during the volatile trading day.

Losers outpaced winners by a ratio of more than 3-to-1 on the New York Stock Exchange and 4-to-1 on the Nasdaq. The VIX, which measures market volatility through options action in the S&P 500, jumped more than 14% to 18.60. A level of 20 is indicative of elevated fear in the market.

On Monday, Spanish bonds yields surged to their highest levels since the creation of the euro even after the continent's finance ministers on Friday backed the details of an aid package worth up to €100 billion for Madrid to bolster its troubled banks. The Spanish 10-year yield managed to surge to more than 7.4%.

"The markets are being driven by the Spanish yields being driven to the high sevens, and now the markets went from an expectation of a bailout of Spanish banks to a sovereign bailout of Spain," said John Burke, president of Burke Financial Strategies. "The problem is Spain is not like the United States. They can actually run out of money. They don't print their own money. If they run out of money they need a bailout. Spain's very a very big economy relative to say Greece or Ireland; countries that have already been bailed out. This is a big deal."

"At the short-dated two-year horizon the yield curve has shifted by 404 basis points to 6.56%," added Andrew Wilkinson, chief economic strategist at Miller Tabak. "The cost of borrowing has therefore more than doubled, which means interest payable to investors at maturity has also doubled. For a country facing employment and spending cuts to contain its budget deficit, this rising interest burden is unwelcome."

"Meanwhile Spain's European partners are suffering from the deepest-ever recession with little prospect of an end in sight."

Over the weekend, Murcia became the second Spanish region to ask for government financial aid, following Valencia's request late last week. Up to six regions may be next in line to ask for assistance, according to media reports.

The euro fell to a more than two-year low against the dollar amid worries about the deepening crisis across the eurozone.

Compounding the eurozone anxiety Monday was a report by German magazine Der Spiegel over the weekend that the International Monetary Fund may decide to not help with any more financing for Greece -- highlighting its growing impatience with the burdens of trying to help hold up the country -- as international inspectors pay a visit to Athens beginning on Tuesday. They are expected to demand more spending cuts from Athens in exchange for more aid.

"We think the key problem in the eurozone is with Europe all together," Burke continued. "You have the euro itself, the currency is printed by the ECB. The ECB is not really a central bank so it's really a little bit fragmented how it's run; so if you looked at what happened in Japan. You know Japan did not respond to their own recession the right way. They starved their economy of money when they needed to print money. And their economy never really recovered."

"So you have the same situation going on there in the eurozone," he said. "You have a problem where governments like Spain are just clearly running out of money and they can't pay their interest, so that can extend to Italy, that can eventually extend to France, unless they fully figure out that they've got to do something different than what they did in Japan."

The FTSE in London finished behind by 2.09% and the DAX in Germany tumbled 3.18% on Monday. The Hong Kong Hang Seng index settled down nearly 3% and the Nikkei in Japan fell 1.86%.

Meanwhile, safe-haven buying had pushed the yield on the benchmark 10-year Treasury to fresh lows Monday but the intensity of the declines lessened as the day wore on. At last check, the 10-year was up 7/32, diluting the yield to 1.437%, while the greenback was advancing 0.17%, according to the dollar index.

September crude oil futures shed $1.14 to settle at $91.83 a barrel. August gold futures fell by $5.40 to settle at $1,577.40 an ounce.

In corporate news, NRG Energy ( NRG) said Sunday it reached a deal to buy GenOn Energy ( GEN) for $1.7 billion in stock. The merger creates the largest competitive power generation company in the United States.

Also, Chinese oil and gas exploration giant Cnooc ( CEO) has agreed to buy Canadian energy company Nexen ( NXY) for $15.1 billion in cash. This is the largest overseas buyout by a Chinese company.

Through Friday, S&P Capital IQ estimated that 69% of the 118 S&P 500 companies that have reported earnings for the 2012 second quarter calendar year have beaten Wall Street's expectations, and 43% of them have shown double-digit profit growth.

Collectively, the S&P 500 has reported a 5.9% EPS surprise, the firm said.

S&P Capital IQ also said the blended growth rate for the S&P 500 is minus 0.81% for the second calendar quarter with only the industrials, consumer staples and information technology sectors expected to show growth.


-- Written by Andrea Tse and Joe Deaux in New York.

>To contact the writer of this article, click here: Andrea Tse.

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