NEW YORK (CNNMoney) -- U.S. stocks sank Tuesday, although the major indexes closed off session lows, as Greece's uncertain political situation keeps investors on edge.
The Dow Jones industrial average (INDU) fell 76 points, or 0.6%, to 12,932. The S&P 500 (SPX) tumbled 6 points, or 0.4%, to 1,364. The Nasdaq (COMP) declined 11 points, or 0.4%, to 2,946.
The selling picked up steam during the morning, with the S&P 500 touching a 2-month low, as stocks in Europe fell sharply. But major indexes in the United Sates pared losses in the last hour of trading.
All eyes continue to be on Europe, after Greece's main center-right partyfailed to form a coalition government. Now, the left-wing coalition, which is opposed to austerity as the way to close Greece's debt gap, will have three days to form a government.
The latest development is feeding investors' fears that Greece might have to drop out of the eurozone.
"The political stalemate in Greece is casting a shadow over risk markets in general and equities in particular," said Nick Stamenkovic, investment strategist at RIA Capital Markets in Edinburgh. "Investors are questioning whether Greece will be a part of the single currency at the end of this year."
Meanwhile, European Union leaders are grappling with the need to boost economic growth during a time of austerity. Early Tuesday, European Council president Herman Van Rompuy set May 23 as the date for an unscheduled EU summit, announcing on his Twitter feed that it would be an "informal dinner."
In addition to the "re-circulating woes in Europe," investors were also rattled by weak sales numbers from McDonalds, said Peter Tuz, portfolio manager at Chase Investment Counsel in Charlottesville, Va.
"More uncertainty in Europe is not good for U.S. markets, nor is the weakness in consumer-oriented stocks," said Tuz.
The dollar gained strength against the euro and British pound, but fell versus the Japanese yen.
Oil for June delivery fell 93 cents to end at $97.01 a barrel.
Gold futures for June delivery dropped $34.60 to settle at $1,604.50 an ounce.
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