U.S. stocks closed lower on Monday under pressure from an overnight plunge in the Shanghai Composite and a continued decline in commodities, amid a lackluster earnings season. (Tweet This)

"The fear factor of China is very much alive in the market. That's nearing us to some technical support levels," said Peter Cardillo, chief market economist at Rockwell Global Capital. "Slow growth out of China just complicates the oil picture."



Stocks came off session lows in the close. The S&P 500 dipped below its 200-day moving average of 2,064.14 and closed a few points above it. The energy sector was the worst performer in the S&P 500 as oil extended losses to trade below $48 a barrel.



The Dow Jones industrial average closed about 127 points lower to its lowest level since February 2. Earlier, the index fell more than 150 points. The Nasdaq Composite ended nearly 1 percent lower.

"I think it's taking money off the table, waiting to see what happens in China—some clarity," said Phil Quartuccio, CEO of Illustro Trading.



Mainland Chinese stocks extended Friday's losses, with the Shanghai Composite dropping nearly 8.5 percent for its largest one-day loss since 2007. The Hang Seng closed about 3 percent lower.



The China Securities Regulatory Commission said late Monday night that the local government will increase purchases of stocks in an effort to keep the equity market up.

Stocks around the world closed lower on Friday as weak PMI data in China and the euro zone increased global growth concerns.

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"Coming into the market you got this great sense that we can't avoid what's happening in the global-macro," said Art Hogan, chief market strategist at Wunderlich Securities. "We just went through a week (in which) 75 percent of S&P companies beat estimates and you would never realize that by the way the market (reacted). You got a week characterized by lackluster revenue growth."