US stocks fall sharply on looming Greek debt default

[NEW YORK] US stocks tumbled on Monday, joining global equity markets in retreat on the looming threat of a Greek debt default.

The Dow Jones Industrial Average fell 350.33 points (1.95 per cent) to 17,596.35.

The broad-based S&P 500 sank 43.85 (2.09 per cent) to 2,057.64, while the tech-rich Nasdaq Composite Index dropped 122.04 (2.40 per cent) to 4,958.47.

Monday marked the first day of 2015 that the S&P 500 swung more than 2.0 per cent and the benchmark index's biggest loss since April 10, 2014.

Greece shuttered its banks and imposed capital controls to halt panic cash withdrawals ahead of a July 5 referendum on creditor proposals.

Standard & Poor's downgraded Greece's credit rating deeper into junk territory and estimated the odds at 50 per cent of the debt-wracked country leaving the eurozone.

"There is a lot of nervousness in terms of how all this is going to play out," said Bill Lynch, director of investment at Hinsdale Associates.

But Alan Skrainka, chief investment officer at Cornerstone Wealth Management, said Monday's losses were far from catastrophic.

"I believe markets outside of Greece have responded in a relatively calm way given the surprise nature" of Greece's announcements, he said.

The Greek economy is relatively small and a default "offers very little risk for the global economy or for the rest of Europe."

All 30 members of the Dow ended in the red, with the biggest drops in DuPont and Visa (both -3.0 per cent).

Banking shares were hard-hit as the Greek saga was seen as potentially delaying a Federal Reserve decision to hike interest rates. JPMorgan Chase fell 2.5 per cent and Bank of America lost 3.0 per cent.

Tech shares such as Facebook (-2.5 per cent) and Priceline (-2.9 per cent) fell sharply, as did biotech companies Amgen (-4.1 per cent) and Gilead Sciences (-3.4 per cent).

Dow member General Electric lost 1.7 per cent after announcing it will sell its vehicle fleet management and financing services in the United States and three other countries to Canadian firm Element Financial for US$6.9 billion.

Food services company Sysco fell 2.2 per cent after abandoning a plan to acquire US Foods following the opposition of US antitrust regulators. Sysco will pay a US$300 million termination fee to US Foods. The takeover had been valued about US$8 billion, including debt.

Bond prices leaped. The yield on the 10-year US Treasury fell to 2.32 per cent from 2.47 percent Friday, while the 30-year dropped to 3.09 per cent from 3.24 per cent. Bond prices and yields move inversely.

AFP

Read more on the Greek crisis here.