United States stocks have ended the day decisively lower on concerns about the Chinese economy but rallied well above their intraday lows as US Treasury yields retreated.
The Dow Jones Industrial Average closed down 139.84 points, or 0.94%, to 14,659.56 points.
The broad-based S&P 500 slid 19.34 points, or 1.21%, to close at 1,573.09 points.
The Nasdaq Composite Index closed down 36.49 points, or 1.09%, to 3,320.76 points.
Stocks opened firmly lower amid concerns about the Chinese economy. But the indices all came back from their intraday losses, with the Dow finishing more than 100 points above its low.
The yield on the 10-year US Treasury stood at 2.55% late on Monday afternoon after reaching as high as 2.66% earlier.
Peter Cardillo of Rockwell Global Capital also cited comments from some US Federal Reserve officials that emphasised the Fed would not scale back its accommodative policy immediately.
"We're probably getting to the end of this overreaction" to the Fed's comments last week, Mr Cardillo said.
The decline in US stocks followed even steeper declines in many international markets.
European stock markets sharply closed lower, with London's FTSE 100 index of leading shares losing 1.42% to 6,029.10 points.
In Frankfurt the DAX 30 index fell 1.24% to 7,692.45 points on Monday, while in Paris the CAC 40 dropped 1.71% to 3,595.63 points.
Markets in Asia were also down, including China's Shanghai Composite, which tumbled after the People's Bank of China signalled it would not take additional steps to increase liquidity despite tightening credit markets.
"Note that even if the government is right and the activities of the shadow banking system are nothing short of the most rank and improper speculation, starving them for credit is nonetheless a dramatic monetary tightening," Chris Low, chief economist for FTN Financial, said of the Chinese policy.
Briefing.com analyst Patrick O'Hare noted that Goldman Sachs slashed its 2013 growth forecast for the Chinese economy from 7.8% to 7.4%.
"Capital markets have grown agitated of late over the thought that central banks are transitioning to a position of being less accommodative," said O'Hare.
"That doesn't necessarily mean that they will do less, it's just that they are sending signals that they are growing increasingly reluctant to do more."
Apple shares hover at $US400 after analyst comments
Apple shares have briefly fallen below $400 after an analyst said the iconic gadget maker is to slash production of its iPhones.
Shares fell as low as $US398, before closing at $US402.34, a drop of 2.7%.
Apple has been on a downward trend since last September when shares topped $US700.
A research note from the brokerage firm Jefferies said Apple is likely to cut production plans for the iPhone to between 25 and 30 million in the third quarter, down from between 40 to 45 million.
It went on to predict that Apple would also trim production in the fourth quarter to between 50 and 55 million from 60 to 65 million.
"Our survey of several hundred Orange, Vodafone, and EE stores in the UK indicates that inventories are elevated for iPhones and the Samsung Galaxy 3," said Peter Misek at Jefferies.
Misek added that "memory module makers have recently been reallocating orders in the third quarter away from Apple and toward emerging market players."
The analyst said production of a new iPhone has not commenced yet "but we believe it is about to begin," adding that he expects a new "iPhone 5S" updating the current model and a "low-cost iPhone" to launch in September.
A separate note from Trip Chowdhry at Global Equities Research said the lower share price and eroding market share are creating a vicious circle for Apple, prompting some employees to jump ship.