Worries About Greece Lead To Steep Drop On Wall Street - U.S. Commentary

(RTTNews) - Stocks moved sharply lower over the course of the trading day on Monday amid continued concerns about Greece and the possibility the debt-laden country will exit the eurozone. With the steep drop on the day, the Dow fell to its lowest closing level in almost five months.

The major averages saw further downside going into the close, ending the session near their worst levels of the day. The Dow plunged 350.33 points or 2 percent to 17,596.35, the Nasdaq tumbled 122.04 points or 2.4 percent to 4,958.47 and the S&P 500 plummeted 43.85 points or 2.1 percent to 2,057.64.

The sell-off on Wall Street came as the latest round of talks between Greece and its creditors broke down over the weekend.

Greek Prime Minister Alexis Tsipras subsequently called for a referendum on the bailout proposals by creditors on July 5th.

The country is required to make a 1.6 billion euro payment to the IMF on June 30th, and the Greek Prime Minister is seeking to get an extension until the referendum.

With the European Central Bank opting to freeze the emergency liquidity assistance for Greek banks in the wake of the referendum call, Greece decided to close its banks and imposed capital controls.

Long lines were seen at ATMs across Greece, as customers have been limited to withdrawals of 60 euros per day.

"The Greek Government's decision to call a referendum has elevated the crisis to a higher level," said Jonathan Loynes, Chief European Economist at Capital Economics. "While a deal may yet come together, a near-term Grexit now seems more likely than not."

Amid the focus on Greece, traders largely shrugged off a report from the National Association of Realtors showing U.S. pending home sales climbed to a nine-year high in May.

NAR said its pending home sales index rose 0.9 percent to 112.6 in May from a slight downward revision of 111.6 in April. Economists had expected the index to rise by 0.6 percent.

A pending home sale is one in which a contract was signed but not yet closed. Normally, it takes four to six weeks to close a contracted sale.

With the bigger than expected increase, the pending home sales index reached its highest level since hitting 113.7 in April of 2006.

Sector News

Reflecting the broad based selling pressure on Wall Street, most of the major sectors showed notable moves to the downside over the course of the session.

Substantial weakness was visible among airline stocks, as reflected by the 3.5 percent loss posted by the NYSE Arca Airline Index. China Southern Airlines (ZNH) and SkyWest (SKYW) posted notable losses.

Brokerage stocks also posted particularly steep losses on the day, dragging the NYSE Arca Broker/Dealer Index down by 3.5 percent to its lowest closing in nearly a month.

Piper Jaffray (PJC), BGC Partners (BGCP), and MarketAxess (MKTX) turned in some of the brokerage sector's worst performances.

Electronic storage, semiconductor, biotechnology, and chemical stocks also showed significant moves to the downside on the day.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably lower during trading on Monday. Japan's Nikkei 225 Index plunged by 2.9 percent, while Hong Kong's Hang Seng Index tumbled by 2.6 percent.

The major European markets also saw significant weakness on the day. While the U.K.'s FTSE 100 Index slumped by 2 percent, the German DAX Index and the French CAC 40 Index plummeted by 3.6 percent and 3.7 percent, respectively.

In the bond market, treasuries moved sharply higher amid the continued concerns about Greece. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, plunged 14.5 basis points to 2.331 percent.

Looking Ahead

Any further developments regarding Greece are likely to attract attention on Tuesday along with U.S. reports on home prices, consumer confidence and Chicago-area business activity.