Stocks had been rallying on the promise of deal to tackle Europe's debt saga since the start of October. While investors were initially encouraged when that long-awaited promise was delivered last Thursday, they are growing increasingly nervous as questions and doubts about the deal continue to emerge.
Those nerves sparked a steep sell-off on Monday.
The Dow Jones industrial average (INDU) lost 276 points, or 2.3%, the S&P 500 (SPX) fell 32 points, or 2.5%, and the Nasdaq Composite (COMP) dropped 53 points, or 1.9%.
Stocks had been trading lower the entire day, but the selling picked up after Greece's Prime Minister George Papandreou announced in parliament that there will be a referendum to approve the decisions made during last week's European Union summit.
Greek Finance Minister Evangelos Venizelos added that the referendum will ask for a "yes or no vote to the new aid package."
"Last week's news was a step in the right direction," said Michael Sheldon, chief market strategist at RDM Financial Group. "But investors are also aware that many details of the roadmap need to be clarified and worked out."
Those remaining questions will likely trigger increased volatility, said Paul Radeke, wealth advisor at KDV Wealth Management.
Investors were also spooked as MF Global became the first high-profile victim of Europe's crisis. Shares of MF Global (MF) were halted as the firm filed for Chapter 11 bankruptcy protection.
MF Global is just one of several Wall Street companies that could end up in trouble as banks are forced to take significant write-offs on the value of their European bonds.
Earlier Monday, investors moved out of riskier assets, including stocks and commodities, and found refuge in the dollar after the Japanese government stepped in to push down the yen's value in international currency markets.
It marked the third time this year Japan's leaders have curbed the yen's rise. A stronger yen makes it more difficult for exporters to remain competitive.
The rest of the week promises a busy schedule, including a G20 meeting in France, the latest monetary policy decisions from the Federal Reserve and European Central Bank, and monthly jobs data out of the United States.
The dollar climbed more than 2% against the euro, and surged over 3% against the Japanese yen Monday. The greenback was also slightly higher versus the British pound.
The dollar gained strength against major global currencies, and pressured commodities that are priced in dollars, such as oil and gold, following Japan's move to curb the yen's rise.
Oil for December delivery fell 13 cents to settle at $93.19 a barrel.
Gold futures for December delivery tumbled $22 to settle at $1,725.20 an ounce.
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