But U.S. stocks dropped only slightly. The Dow Jones industrial average fell 6.74 points to close at 12,653.72, for a drop of 0.1 percent. The Dow lost as much as 131 points in morning trading then slowly recovered in the afternoon.

Borrowing costs for European countries with the heaviest debt burdens shot higher. The two-year interest rate for Portugal's government debt jumped to 21 percent after trading around 14 percent last week.

Greece and the investors who bought its government bonds were said to be close to an agreement over the weekend. A tentative deal would replace bonds held by investment funds and banks with new ones at half the face value.

The plan is aimed at cutting Greece's debt by roughly (euro) 100 billion ($132 billion). Greece needs it to secure a crucial installment of bailout loans and make an upcoming bond payment. But a deal has been in the works for weeks and could still fall apart.

The focus on Greece has shifted attention away from what's going well in the U.S., said Jack Ablin, chief investment officer at Harris Private Bank. Companies have reported stronger quarterly earnings, and hiring has picked up.

Our collective breath has been held for so many months,'' he said.

At this point, a good or even a bad resolution of Greece's debt crisis could lead to a stronger U.S. stock market, Ablin said.

If it finally happens and the world doesn't fall apart, maybe we'll have a reason to take risk again,'' he said. ``Once you pull off the Band-Aid, it feels better.''

U.S. Treasury yields sank to their lowest level this year as traders parked cash in the safest assets. The yield on the 10-year Treasury sank to 1.85 percent. It was trading above 2 percent last Wednesday.

The yield on the five-year Treasury note hit a record low of 0.71 percent early Monday. It finished Monday at 0.74 percent, from 0.75 percent late Friday.

An agreement between Greece and its creditors could serve as a blueprint for other European countries with heavy debt burdens. Dan Greenhaus, chief global strategist at BTIG, pointed to Portugal's soaring bond yields in a note to clients.

At this rate, Portugal is going to move from the back to front burner in very, very short order,'' he said.

European leaders also gathered in Brussels, focusing on how to stimulate economic growth when huge government spending cuts threaten to push many countries back into recession. The latest data showed Spain's economy shrank in the last three months of 2011.

In other trading, the Standard & Poor's 500 index fell 3.32 points, or 0.3 percent, to 1,313.01. The Nasdaq composite lost 4.6 points, or 0.2 percent, to 2,811.94.

The euro dropped 0.5 percent against the dollar, to $1.3124 in late trading Monday from $1.3208 late Friday. It was worth almost $1.50 in May.

European stocks sank. French and Spanish stock markets closed down 1.6 percent. Italian stocks closed down 1.2 percent and German stocks 1 percent.

Among stocks making big moves Friday:

The fast food chain Wendy's fell 3.8 percent. The Wendy's Co. said a key measure of earnings dropped 30 percent in the fourth quarter. Charges from selling Arby's offset the effects of a jump in sales.

PharMerica Corp. plunged 11 percent. The Federal Trade Commission said it was suing to block rival pharmacy company Omnicare Inc. from completing its $457 million takeover of PharMerica. The agency said a merger of America's two largest long-term care pharmacies would raise the cost of Medicare prescription plans covering drugs for nursing home residents. Stock in Omnicare Inc. fell less than 1 percent.