S&P 500 suffers Worst one-day Drop in 2015

U.S. stocks got Monday hammered by a confluence of bad news, 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 SPX, -2.09% 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 DJIA, -1.95% 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 COMP, -2.40% 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 VIX, +34.45% 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.

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. 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

European stock markets SXXP, -0.96% were slammed when trading opened Monday, with Germany’s DAX DAX, -0.94% closing down 3.6%. Chinese stocks HSI, +1.26% SHCOMP, +5.53% dropped, and the Shanghai Composite moved further into bear-market territory despite a decision Saturday by China’s central bank to cut interest rates.

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

Gold futures were also in demand, GCQ5, -0.36% rising 0.5% to $1,179 an ounce, but oil futures CLQ5, -0.10% sold off, falling 2.2%. 

In corporate news, Gannett Co Inc. TGNA, +6.46% shares rose 6.5% after it completed its separation into two publicly traded companies.

General Electric Co. GE, -1.66% was down 1.7% after it announced it will sell its U.S., Mexico, Australia and New Zealand fleet businesses 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. Citigroup Inc C, -2.59% fell 2.6%, J.P. Morgan Chase & Co. JPM, -2.54% fell 2.5%, Goldman Sachs Group Inc. GS, -2.59% dropped 2.6%.

Source: MarketWatch