* S&P 500 falls 5 percent over the past four sessions
* Energy, material shares plunge on uncertain growth outlook
* Tenet Health to buy Vanguard Health; Keynote to be bought
* Indexes off: Dow 0.5 pct, S&P 0.7 pct, Nasdaq 0.7 pct
By Alison Griswold
NEW YORK, June 24 (Reuters) - U.S. stocks shed some of the day's losses as bond markets stabilized on Monday, but Wall Street was still down on concerns about the Federal Reserve's plans to reduce its monetary stimulus and on overnight losses in Chinese equity markets.
Seven of the 10 S&P 500 sectors were down, led by losses in materials and financials, and more than three-quarters of the stocks traded on the New York Stock Exchange were lower.
Markets have been under pressure as investors cashed out of losing positions in the last several days since the Fed suggested it would cut back on monthly bond purchases before long.
Stocks fell immediately after the market's open and were down as much as 2 percent, extending losses from last week when the S&P 500 posted its worst weekly performance in two months.
However, stocks reversed the downward move as yields on U.S. Treasuries moved lower and prices came back from sharp losses. The yield on the 10-year Treasury note reached 2.67 percent, but later traded at 2.53 percent.
Developments in China's financial system weighed on sentiment on Wall Street. The People's Bank of China said banks needed to do a better job of managing their cash and lending as the central bank attempts to move the China's away from credit-driven investment.
"Obviously there was bad economic data out of China and we're still concerned with the Fed tapering, but the big news is anything that causes interest rates to rise," said Doreen Mogavero, chief executive of Mogavero, Lee & Co. in New York.
"I think it's clear that the Fed pulling out of the Treasury market has caused interest rates to go up."
The news from China sparked concerns that the Chinese economy could slow further. Shares in Shanghai fell 5.3 percent while Chinese financial shares plummeted.
The Dow Jones industrial average was down 66.96 points, or 0.45 percent, at 14,732.44. The Standard & Poor's 500 Index was down 11.63 points, or 0.73 percent, at 1,580.80. The Nasdaq Composite Index was down 23.12 points, or 0.69 percent, at 3,334.13.
The Fed last week said if the economy improves, it could begin to reduce its $85 billion in monthly bond purchases before the end of the year.
The S&P 500 has slumped 5 percent over the past four sessions and breached both its 100-day and 50-day moving averages, a sign that near-term momentum may be toward the downside.
The S&P 500 has fallen 4 percent in June, putting the benchmark index on track to end a seven-month rise as well as its worst monthly performance since May 2012. The index is down 5.4 percent from its all-time closing high on May 21.
Energy and materials stocks, both tied to the pace of growth, were weak. Cliffs Natural Resources sank 6.5 percent to $16.07 as one of the biggest decliners on the S&P. Consol Energy fell 4.9 percent to $28.35 and Peabody Energy lost 6.5 percent to $14.94.
The PHLX gold/silver sector index fell 2.4 percent.
U.S. hospital operator Tenet Healthcare Corp will buy smaller rival Vanguard Health Systems Inc for $4.3 billion or $21 per share including debt to expand into new locations. Vanguard shares jumped 67.7 percent to $20.75 and Tenet gained 4.2 percent to $43.60 as the S&P's top advancer.