YAHOO [BRIEFING.COM]: The major market averages fell in excess of 1% as the euro descended to a near two-year low, but support in afternoon action helped the broad market rally out of the red.

The tone ahead of the open was firmly negative as participants responded to renewed weakness abroad – the bourses of Europe had already closed when comments were made on Monday regarding possible plans by Greece to exit the euro. The averages of Asia also had to account for that headline, along with Monday’s announcement that Japan’s long-term debt rating was cut by analysts at Fitch. More recently, the World Bank trimmed its growth forecast for China to a rate slightly above 8%.

Talks today among European leaders about the need for stability were widely credited for helping the euro firm up this morning. The euro even made an incremental gain against the greenback, but eventually sellers renewed their efforts. The ensuing slide sent the euro to less than $1.26, or its lowest level in nearly two years. It eased up from there, but was still down about 0.6% against the greenback at the close of the session.

Energy stocks were a heavy drag on trade for most of the session, down nearly 2% at their lowest level of the day. The sector rallied to a 0.4% gain.

Materials stocks made an even more impressive swing into positive territory. The sector was also down almost 2%, but rallied all the way to a gain of more than 1%.

The swings by natural resource plays were more impressive in light of the losses suffered by commodities. Overall weakness in the commodity complex left the CRB Index to fall 1.8%, which stands as its worst single-session slide since early April. Oil fell to a new 2012 low of $89.28 per barrel before closing at $89.80 per barrel.

Short covering likely helped fuel the stock market’s afternoon reversal. Given the stretch of losses suffered by stocks in recent weeks and persistently precarious conditions in the eurozone, many market participants had placed bets that the path of least resistance would be downward. Once stocks stabilized and started to turn higher, many were prompted to exit their positions so as to take profits or protect against additional upside action.

Although the broad market was able to rebound in impressive fashion, Dell (DELL 12.49, -2.59) still endured its worst one-day drop in more than a decade to set a new 52-week low. The stock’s precipitous drop was owed to a disappointing quarterly report. Fellow Tech outfit Hewlett-Packard (HPQ 21.08, -0.70) suffered a marked loss ahead of its latest earnings announcement.

New home sales numbers for April made up the only dose of domestic data today. They hit an annualized rate of 343,000, which is up from the prior month rate of 332,000, and a little better than the rate of 339,000 that had been broadly expected.

Crude oil extended yesterday’s losses amid broad market weakness. The energy component spent its entire pit session in negative territory, falling to a new 2012 low of $89.28 per barrel in the face of better-than-expected inventory data that showed a build of 883,000 barrels when a build of 1.5 million barrels was anticipated. Gasoline had draw of 3.30 million barrels when the consensus called for a draw of 500,000 barrels. Crude eventually settled with a 2.2% loss at $89.80 per barrel. 

Although natural gas began pit trade in the red at its session low of $2.66 per MMBtu, it climbed into positive territory and finished with a 1.5% gain at $2.74 per MMBtu.

Precious metals dove deeper into negative territory in response to a stronger dollar. Better-than-anticipated U.S. home sales and turmoil surrounding the EU summit were in the mix. Gold sold-off to a floor session low of $1532.80 per ounce before gaining support from buyers. However, gold still finished 1.8% lower at $1548.20 per ounce. Silver followed suit as it dipped to a session low of $27.08 per ounce in morning action and settled with a 2.3% loss at $27.49 per ounce. 

Overall weakness in the commodity complex left the CRB Index to fall 1.8%, which stands as its worst single-session slide since early April.

Advancing Sectors: Materials +1.1%, Industrials +0.6%, Consumer Discretionary +0.6%, Energy +0.4%, Financials +0.4%, Tech +0.2%
Declining Sectors: Telecom -0.2%, Consumer Staples -0.3%, Health Care -0.6%, Utilities -0.7%DJ30 -6.66 NASDAQ +11.04 NQ100 +0.3% R2K +0.7% SP400 +0.6% SP500 +2.23 NASDAQ Adv/Vol/Dec 1362/1.92 bln/1143 NYSE Adv/Vol/Dec 1826/863 mln/1182