U.S.
stocks fell sharply in heavy trading on Monday and the S&P 500 and
the Dow had their worst day since October after a collapse in Greek
bailout talks intensified fears that the country could be the first to
exit the euro zone.
The European Central Bank froze funding to Greek banks, forcing Athens to shut banks for a week to keep them from collapsing.
And Greece appeared to confirm it was heading for a default after a government official said the country would not pay a 1.6 billon euro loan installment due to the International Monetary Fund on Tuesday.
U.S. investors also worried about Puerto Rico's debt problems and a bear market in China the day before quarter-end and ahead of Thursday's U.S. jobs report and the long weekend for U.S. Independence Day.
"None of that bodes well for people stepping in and buying the dips as has been the mentality most of the year," Michael James, managing director of equity trading at Wedbush Securities in Los Angeles who said U.S. shares could fall again Tuesday.
"Could
that reverse itself tomorrow? It's going to take a lot of good news
from Greece," he said noting that portfolio managers would not want to
show risky equities on their books at the end of the second quarter.
The S&P and Dow Jones Industrial Average .DJI had their worst days since Oct. 9 and both turned slightly negative for the year to date. The last annual decline for both indexes was 2008. The Nasdaq had its biggest one-day percentage decline on Monday since March 25.
Volatility rose sharply and all 10 S&P sectors retreated while the Global X FTSE Greece exchange-traded fund (GREK.K), which tracks the Athens stock market, fell 20 percent. In Europe, the blue-chip Euro STOXX 50 index .STOXX50E had suffered its biggest one-day fall since 2011.
"There is no mechanism to be ejected from the European Union. This has never happened before," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. "When you don't know what could happen you sell. You get on the sidelines."
While the Greek economy is small and most U.S. corporations have limited direct exposure, investors are concerned about the fallout across Europe if Greece exits the euro zone.
A snap Reuters poll of economists and traders found a median 45 percent probability that Greece would leave the euro zone.
And Greece appeared to confirm it was heading for a default after a government official said the country would not pay a 1.6 billon euro loan installment due to the International Monetary Fund on Tuesday.
U.S. investors also worried about Puerto Rico's debt problems and a bear market in China the day before quarter-end and ahead of Thursday's U.S. jobs report and the long weekend for U.S. Independence Day.
"None of that bodes well for people stepping in and buying the dips as has been the mentality most of the year," Michael James, managing director of equity trading at Wedbush Securities in Los Angeles who said U.S. shares could fall again Tuesday.
The S&P and Dow Jones Industrial Average .DJI had their worst days since Oct. 9 and both turned slightly negative for the year to date. The last annual decline for both indexes was 2008. The Nasdaq had its biggest one-day percentage decline on Monday since March 25.
Volatility rose sharply and all 10 S&P sectors retreated while the Global X FTSE Greece exchange-traded fund (GREK.K), which tracks the Athens stock market, fell 20 percent. In Europe, the blue-chip Euro STOXX 50 index .STOXX50E had suffered its biggest one-day fall since 2011.
"There is no mechanism to be ejected from the European Union. This has never happened before," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. "When you don't know what could happen you sell. You get on the sidelines."
While the Greek economy is small and most U.S. corporations have limited direct exposure, investors are concerned about the fallout across Europe if Greece exits the euro zone.
A snap Reuters poll of economists and traders found a median 45 percent probability that Greece would leave the euro zone.
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