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NEW YORK (CNNMoney)
The initial euphoria that Cyprus reached a deal with EU negotiators to secure a €10 billion bailout of its banking system gave way to broader fears over the health of the banking systems in other countries, notably Spain and Italy.
"Once you deal with the banking system in Cyprus, you need to address the rest of the periphery in Europe," said Paul Powers, a managing director at Raymond James. "It reminds people how fragile the rest of the system can be."
Investors had largely dismissed Cyprus' bailout as unique to the tiny island nation. But investors got spooked after the head of the Eurogroup of eurozone finance ministers, Jeroen Dijsselbloem, told news outlets that what happened in Cyprus could be a model for bailouts throughout the EU.
The S&P 500, the Dow Jones industrial average and Nasdaq dropped between 0.3% and 0.5%, but traders said volume was particularly light. Earlier, the Dow hit a new intraday record high and the S&P 500 nearly topped its all-time closing high.
Related: Tough times for Cyprus after EU bailout
European markets turned negative, after earlier rallying more than 1%, while Asian markets ended mixed. The dollar rose against the euro. After an initial pop above $1.30, the euro was trading around $1.28.
European bank stocks also came under pressure, with shares of Societe Generale (SCGLF) falling nearly 7% and Deutsche Bank (DB) shedding 5%. BBVA (BBVA) and Banco Santander (SAN) were also markedly lower.
Cyprus' new bailout program includes a deep restructuring of the country's banking sector. Without a deal, the tiny state risked losing emergency funding from the European Central Bank as early as Tuesday. That would have meant financial collapse and almost certain exit from the eurozone.
Related: Fear & Greed Index: Still greedy
Aside from Cyprus, Dell (DELL, Fortune 500) shares jumped more than 3%, after the PC maker said early Monday that it had received two competing bids to founder Michael Dell's buyout offer. Both Carl Icahn's Icahn Enterprise (IEP, Fortune 500), and Blackstone Group (BX) submitted separate buyout offers, which Dell said may turn out to be superior.
Shares of Apollo Group (APOL) rallied 8%, after the company reported earnings that blew past estimates, even as enrollment at University of Phoenix declined nearly 16%.
BlackBerry (BBRY) continued to come under pressure, after its new Z10 phone received a lukewarm reception by U.S. consumers. Goldman Sachs also downgraded the smartphone maker to neutral, calling the U.S. launch "disappointing."
Shares of Dollar General (DG, Fortune 500) rose after the retailer's profit topped expectations.
Best Buy (BBY, Fortune 500) stock rose after the retailer's founder, who recently dropped a plan to take the company private, announced that he would return to become chairman emeritus.
In the commodities market, oil prices rose 1%, while gold prices edged lower.
The U.S. dollar rose against the British pound and Japanese yen.
The yield on the 10-year Treasury note edged up to 1.91% from 1.95 in early trading Monday. 
First Published: March 25, 2013: 9:49 AM ET
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