Wall Street closed lower but pared earlier losses on Monday, following a selloff in stocks around the world, as top Federal Reserve officials slightly eased market worries over the Fed's possible tapering of its bond purchases later this year.

The Dow Jones Industrial Average slipped 139.84 points, or 0.94 percent, to 14,659.56 points. The S&P 500 shed 19.34 points, or 1. 21 percent, to 1,573.09 points. The Nasdaq Composite Index fell 36. 49 points, or 1.09 percent, to 3,320.76 points.

Wall Street opened lower and retreated further in the morning trading session, following a decreasing in stocks across the world were sold off amid fears over the cash squeeze in China and the Fed's possible exit from its bond purchases.

The Shanghai Composite Index tumbled 5.3 percent on Monday, the biggest drop since August 2009. The Chinese benchmark stock index lost over 20 percent from its previous peak to enter a bear market.

The People's Bank of China refrained from pumping cash into the market despite a liquidity tightening as the central bank acted in an attempt to move the economy away from credit driven investment.

The Japanese Nikkei ticked down 1.3 percent and European stocks closed sharply lower on Monday on the heels of a heavy selling in Chinese stocks.

However, the U.S. market rebounded in the afternoon trading session, cutting part of earlier losses as remarks from top Fed officials relieved market mood.

Dallas Fed President Richard Fisher said Monday that "I'm not in favor of going from wild turkey to cold turkey over night," when commenting the Fed tapering policy. Also on Monday, Minneapolis Fed President Narayana Kocherlakota said markets are wrong to view the central bank more hawkish in its views on scaling back quantitative easing.

Last week, the Dow and the S&P 500 lost 1.80 percent and 2.11 percent respectively, their second worst weekly losses this year as Fed Chairman Ben Bernanke hinted in a news conference on Wednesday following a two-day policy meeting that bond buying could be reduced later this year, depending on conditions.

The economic data came in a little positive on Monday, but failed to provide momentum to the market.

Texas factory activity increased sharply in June, according to the Federal Reserve Bank of Dallas. The production index, a key measure of state manufacturing conditions, rose six points to 17.1, posting its highest reading in more than two years.

The May Chicago Fed National Activity Index, a monthly index designed to gauge overall economic activity and related inflationary pressure, stood at minus 0.30 in May, up from minus 0. 52 in April. Endi