Europe's debt problems rumbled across global financial markets again Tuesday.
U.S. stocks fell sharply in early trading when it appeared that European markets were heading for a second straight day of deep losses, then bounced back in the afternoon.
The Dow Jones industrial average fell by many as 307 points before 10:45 a.m. before closing the day down 100 points, or 0.9 percent, at 11,139.30.
The Standard and Poor's 500 index lost 8.7 points, or 0.7 percent, to 1,165. The NASDAQ composite fell 6.5, or 0.26 percent, to 2,473.
The Stoxx 600 Europe index lost 4.1 percent Monday on fears that Europe's debt problems could slow economic growth around the world. The index was down nearly 2 percent Tuesday when U.S. markets opened and finished with a loss of 0.7 percent.
"It's becoming a pattern that the U.S. market breathes a sign of relief once trading in Europe is finished," said Quincy Krosby, market strategist at Prudential Financial.
Europe's debt problems have simmered for more than a year. Bailouts for Ireland and Greece have not quelled fears that either country will default on its loans, an event that could lead to the collapse of the euro. Those concerns continued Tuesday as Italy was hit by a general strike ahead of votes this week on a budget-cutting package needed to shore up that country's finances.
Peter Boockvar, equity strategist at Miller Tabak & Co., said fears are mounting that the Greek government may not pay bond investors back. "Officials are coming to the realization that there's no way Greece can pay its money back and maybe we're better off just letting it default," he said.
September is historically the worst month for the stock market. The Dow has dropped an average of 0.9 percent each September since 1950, according to the Stock Trader's Almanac. Traders expect the trend to hold true this year as uncertainty continues over Europe's debt crisis and the stagnating U.S. economy. The U.S. government reported Friday that there was no job growth last month. It was the worst reading on jobs since September 2010.
All 10 company groups that make up the S&P 500 index fell. Pfizer and Johnson & Johnson were the only 2 of the 30 companies that make up the Dow to push higher.
Bank stocks fell more than the overall market. Federal regulators filed lawsuits late Friday against 17 major banks, saying they sold Fannie Mae and Freddie Mac mortgage-backed securities that lost value when the housing market collapsed. Bank of America Corp. and JPMorgan Chase & CO. each lost nearly 4.
Assets that traders see as more likely to hold their value during a weak economy rose. The yield on the 10-year Treasury note fell to 1.97 percent. On Monday the yield fell to 1.91 percent in Asian trading, the lowest since the Federal Reserve Bank of St. Louis began keeping daily records in 1962. Bond yields fall when their prices rise.
In a sign that investors expect the economy to slow, oil futures dropped $2, or 2 percent, to $84.44 a barrel.
A relatively strong report on U.S. service companies did little to stem the losses. The Institute for Supply Management said the service sector grew more than analysts had expected in August. Growth in that part of the economy, which employs nearly 90 percent of America's work force, fell the three previous months.