By Anora Mahmudova and Carla Mozee, MarketWatch
U.S. stocks got hammered by a confluence of bad news Monday,
headlined by Greece's unraveling debt negotiations that placed the
European country on the brink of fiscal collapse.
Negotiations between Greece and its creditors collapsed over the
weekend after Greece's Prime Minister Alexis Tsipras unexpectedly
called for a referendum on whether to accept reform measures
demanded by the country's lenders. The country's parliament
approved the vote, which will be held July 5.
Adding to the market's woes, the market also was swooning from
shakiness in China and comments from the governor of Puerto Rico,
who said the U.S. commonwealth is facing a financial crisis and
cannot pay back more than $70 billion in municipal debt.
The bad news led the Dow Jones Industrial Average to its largest
one-day point drop in more than two years, while the S&P 500
saw the biggest decline in more than a year, as investors dumped
risky assets such as stocks.
The S&P 500 plunged 43.85 points, or 2.1%, to 2,057.64 and
turned negative for the year. The index also fell below a key
technical support level, with analysts suggesting further declines
likely. Losses were broad-based with all 10 main sectors closing
sharply lower.
The Dow Jones Industrial Average dropped 350.33 points, or 2%,
to 17,596.35, its biggest point drop in two years. It also was a
brutal day for the tech-heavy Nasdaq Composite , which plunged
122.42 points, or 2.4% to 4,958.47.
Investors rushed to safety, pushing up prices of Treasurys and
other haven assets. The yield on a 10-year note, which moves
inversely to prices dropped 15 basis points to 2.32%.
Meanwhile, implied volatility on the S&P 500 as measured by
the CBOE Volatility index jumped 39% to above 19, the highest since
January, implying that investors are fretting about the chaos in
Europe.
The developments over the weekend hit European stocks hard,
while Asian equities were under pressure as Chinese stocks closed
in bear-market territory on Monday.
"Greece has had a problem for the past five years. If you are
selling because of Greece, it's misguided. Puerto Rico's debt
problem, plunge in China's stock markets, mediocre economy in the
U.S. and a large drop in transports are a lot more worrying," said
Mike Antonelli, equity sales trader at R.W Baird & Co.
Read the latest news on the Greek debt crisis here
(http://www.marketwatch.com/story/greek-debt-crisis-latest-news-2015-06-29)
Commenting on the selloff, Howard Silverblatt, senior index
analyst at S&P Dow Jones Indices said: "The market lost steam
as the day went on, but the market was orderly -- there was no
panic."
Investors rough start to the U.S.-holiday-shortened week comes
as the closely watched U.S. jobs report for June is due Thursday
(http://www.marketwatch.com/story/faster-job-gains-are-great-but-bigger-paychecks-still-await-2015-06-28).
The report also will help the market gauge the health of the U.S.
economy as Europe displays shakiness.
Separately, market reaction to pending-home sales in May was
muted, even though sales rose to their highest level in over nine
years, the National Association of Realtors said Monday.
Greek referendum: A 'no' vote means no to Europe, Juncker says
(http://www.marketwatch.com/story/greek-referendum-a-no-vote-means-no-to-europe-juncker-says-2015-06-29)
European stock markets were slammed when trading opened Monday,
with Germany's DAX closing down 3.6%. Chinese stocks dropped, and
the Shanghai Composite moved further into bear-market territory
despite a decision Saturday by China's central bank to cut interest
rates
(http://www.marketwatch.com/story/chinas-central-bank-cuts-interest-rates-2015-06-27).
Events in Greece caused wild fluctuations in currency market,
with euro falling then rising against other currencies. Euro turns
positive on the day as Greece worries subside
(http://www.marketwatch.com/story/greece-default-threat-stokes-euro-volatility-2015-06-29)
(http://www.marketwatch.com/story/greece-default-threat-stokes-euro-volatility-2015-06-29)Gold
futures were also in demand, rising 0.5% to $1,179 an ounce, but
oil futures sold off, falling 2.2%. Read: Oil prices slump as Greek
crisis pummels markets
(http://www.marketwatch.com/story/crude-oil-prices-slump-as-greek-crisis-pummels-markets-2015-06-29).
In corporate news, Gannett Co Inc. (TGNA) shares rose 6.5% after
it completed its separation into two publicly traded companies.
General Electric Co. (GE) was down 1.7% after it announced it
will sell its U.S., Mexico, Australia and New Zealand fleet
businesses
(http://www.marketwatch.com/story/ge-strikes-69-billion-deal-to-sell-fleet-units-2015-06-29)
for $6.9 billion. A separate, smaller deal is in the works to
unload its business in Europe.
The Greek debt crisis put pressure on U.S. bank stocks
(http://www.marketwatch.com/story/citigroup-leads-losses-for-major-us-banks-2015-06-29).
Citigroup Inc (C) fell 2.6%, J.P. Morgan Chase & Co. (JPM) fell
2.5%, Goldman Sachs Group Inc. (GS) dropped 2.6%.
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