US Stocks cut losses on hopes for Greece (ext.)

NEW YORK (CNNMoney) -- U.S. stocks trimmed earlier losses by more than half Monday afternoon, amid hopes that Greece may avoid a default. But the uncertainty over the debt-laden nation's future still ended the market's 5-day winning streak.

The Greek finance ministry said talks on Monday with officials from the European Commission, the International Monetary Fund and the European Central Bank were "productive and substantive."

The Dow Jones industrial average (INDU) ended 108 points lower, or 0.9%. The S&P 500 (SPX) fell 12 points, or 1%, and the Nasdaq composite (COMP) lost 9 points, or 0.4%.

Despite what seems like progress, investors will remain skittish until an official deal is announced.

"We are drawing closer to the date at which the Greek government is going to run out of money," said Mark Luschini, the chief investment strategist at Janney Montgomery Scott.

Even though the Greek economy is relatively small, "the great unknown is problematic for investors" said Luschini.

Also this week, investors are waiting to hear from Federal Reserve Chairman Ben Bernanke. The Federal Open Market Committee has expanded the length of its meeting to two days from one, a move that investors have taken as a sign that the Fed will announce new actions to spur the economy at the conclusion of its meeting on Wednesday.

Experts largely agree that the Fed will announce a program dubbed Operation Twist, in which the central bank would try to boost lending by swapping out short-term bonds in its portfolio with long-term Treasury bonds. The intended outcome: lower long-term interest rates without increasing the size of the Fed's balance sheet.

"If the Fed goes ahead with Operation Twist, I think it will provide a minor psychological lift and put a bit of a floor in the market in the near-term, but I don't think it will fundamentally boost the economy," said Sheldon, nothing that long-term interest rates are already at historic lows.

"What the economy needs right now is confidence and constructive programs coming out of Washington," Sheldon added.

The dollar surged 1% against the euro and gained ground versus the British pound. The greenback was slightly lower against the Japanese yen.

Oil for October delivery, nearing expiration, slipped $2.58, or 2.6%, to settle at $85.70 settle a barrel.

Gold futures for December delivery fell $35.80, or 2%, to settle at $1,778.90 an ounce.