Doubts about Europe deflate U.S. stocks

Stocks closed sharply lower Monday after doubt emerged that last week's historic agreement to bind the budgets of European countries more closely together will solve the region's financial crisis.

Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, said the agreement "kicks off a process that has a chance of solving the next crisis, not this one."

The Dow closed down 162.87 points, or 1.34 percent, at 12,021.39. It was down as much as 243 points before rising in the final hour of trading. Monday's loss erased nearly all of the Dow's gains from last week. The Standard & Poor's 500 index lost 18.72 points, or 1.49 percent, to close at 1,236.47. The Nasdaq composite index dropped 34.59, or 1.31 percent, to close at 2,612.26.

Bank stocks declined steeply. Investors fear big banks might be damaged by the turmoil in Europe. Morgan Stanley fell 6.1 percent, Citigroup Inc. 5.4 percent. Bank of America Corp. and JPMorgan Chase & Co. posted the biggest and third-biggest losses in the Dow 30, falling 4.7 percent and 3.4 percent, respectively.