U.S. Stocks Tank Over Fears of Possible Greek Default

U.S. stocks fell sharply on Monday as renewed fears of a Greek debt default prompted investors to book some of last week's gains and turn toward the safety of U.S. government debt.

Energy and financial stocks were the day's top decliners. The S&P energy sector index .GSPE was off 3.1 percent as oil prices tumbled. The financial sector index .GSPF lost 2.6 percent following a steep decline in European banks on worries euro zone leaders won't be able to prevent a default by debt-stricken Greece.

The market really fought back last week despite the sovereign debt concerns, weakening euro and the Greek default fears because everyone was sort of expecting the policy makers to come up with something over the weekend, said Larry Peruzzi, senior equity trader at Cabrera Capital Markets in Boston.

We saw none of that. They had their meetings, but nothing came out of them, disappointing the investors and triggering the sell-off.

The Dow Jones industrial average .DJI was down 231.74 points, or 2.01 percent, at 11,277.35. The Standard & Poor's 500 Index .SPX was down 25.64 points, or 2.11 percent, at 1,190.37. The Nasdaq Composite Index .IXIC was down 55.08 points, or 2.10 percent, at 2,567.23.

The U.S. 30-year Treasury bond rose two points in price.

At meetings on Saturday, European Union finance ministers broke no new ground in dealing with the crisis and made no decision on whether to give more firepower to the 440 billion euro ($607 billion) bailout fund, as suggested by U.S. Treasury Secretary Timothy Geithner.

Investors bought government debt after the Greek prime minister, George Papandreou, canceled a visit to the United States to instead chair a cabinet meeting on Sunday, a day before EU and International Monetary Fund inspectors hold a conference call with Finance Minister Evangelos Venizelos to hear how Greece will plug this year's budget shortfall.

A regional election defeat for German Chancellor Angela Merkel on Sunday, her sixth election defeat this year, also kept investors on edge.

In the United States, homebuilder sentiment dipped in September, with an industry index mired in a low range as the housing market continues to struggle, the National Association of Home Builders said. Market reaction was muted.

U.S.-listed shares of a Swiss bank UBS (UBS.N) fell 4.1 percent to $11.39 as the bank began an internal investigation into the catastrophic failure of its risk systems after rogue equity trades cost UBS $2.3 billion, raising the pressure on top management.

Netflix Inc (NFLX.O) shares rose 2.5 percent to $158.78 after it said it would separate its movie streaming business and its DVD-by-mail service, which will be called Qwikster.

U.S. stocks rose for a fifth day in a row on Friday and the S&P 500 index scored its best week since early July. The S&P ended up 0.6 percent at 1,216.01.

(Editing by Padraic Cassidy)