Dow plunges triple digits into red for year, Nasdaq slips 2.4% on Greece
U.S. stocks plunged nearly 2 percent or more on Monday with the Dow and S&P 500 wiping out gains for the year on escalating tensions between Greece and its creditors. (Tweet This)

"I think the uncertainty around Greece is just making people skittish and we haven't had a meaningful pullback for some time," said Ben Pace, chief investment officer at HPM Partners. "It's hard for anybody to fight this uncertainty."

"It should be a reasonably isolated situation but we don't know that for sure," he said.

The Dow Jones industrial average closed 1.95 percent lower, falling below its 200-day moving average, with Visa and DuPont leading nearly all blue chips lower. The index is 1.27 percent lower year-to-date.

The Nasdaq Composite fell more than 120 points, or 2.4 percent, to end below 5,000 for the first time since May 13, with biotechs and Apple both more than 1 percent lower. The last time the index dipped below the psychologically key level was June 15.

The S&P 500 declined more than 2 percent for the first time in 2015 with financials tumbling about 2.4 percent to lead all ten sectors lower. The index fell into negative territory for the year, off 0.06 percent.



Stocks extended losses in late-afternoon trade as Greece Prime Minister Alexis Tsipras said the stronger the rejection of the creditor deal, the stronger the Greek hand in the talks. He added that the aim for the referendum is to bring continuation of negotiations with lenders.

S&P downgraded Greece to "CCC-" and said in a Reuters report that the probability of the country exiting the euro zone is now about 50 percent. Earlier, a Greek official told Reuters in midday trade ET that the country will not pay its loan due to the International Monetary Fund on Tuesday.

The CBOE Volatility Index (VIX) , widely considered the best gauge of fear in the market, jumped more than 36 percent to above 19. The surge is the largest one-day move so far this year.



"The VIX index is continuing to move higher, suggesting investors are reaching a 'Fear Level Crisis,'" Peter Cardillo, chief market economist at Rockwell Global Capital, said in a note. "This level of high volatility is poised to feed on itself, thereby threatening major support levels."

Read More 7 things investors need to know about the Greek crisis



Art Hogan, chief market strategist at Wunderlich Securities, was watching to see if the S&P 500 could hold its 200-day moving average of 2,053.55. The index closed just 4 points above it. Earlier in the day, the index broke through the 2,070 support level that many analysts were watching.

"You've got a lot of influences coming in, some expected and some unexpected. In the aggregate that's going to keep alot of pressure on markets both internationally and domestically," Hogan said.

In addition to capital controls in Greece, Puerto Rico's governor said the commonwealth cannot pay its debt of about $72 billion.

"I think that's obviously another issue," said Quincy Krosby, market strategist at Prudential Financial. "I think it's probably ancillary to Greece right now—part of the cross currents."

Read More White House spokesman: Not contemplating a federal bailout of Puerto Rico



Mainland Chinese markets entered bear market territory, with the Shanghai Composite closing 3.3 percent lower on Monday despite initial attempts at gains following the central bank's rate cut over the weekend.

Concerns over Greece hit global markets hard, with stocks in France and Germany closing more than 3 percent lower. Asian stocks also fell overnight, with Japan's Nikkei off 2.9 percent.

"For the most part the United States and U.S. equities are pretty well insulated from the crisis in Greece," said Jack Ablin, chief investment officer at BMO Private Bank. He said the issues in Europe are more political.



Stocks pared opening losses in mid-morning trade. It's "better than expected, not as bad as possibly feared," said Robert Pavlik, chief market strategist at Boston Private Wealth. "This is a knee-jerk reaction and one that will work itself out. ... In the grand scheme of things (Greece) is not a big deal for the global economy."



Pavlik said the declines presented more of a buying opportunity, especially in financials, consumer discretionary, health care and technology.

Read More'Period of stress' to plague markets in week ahead



"The U.S. market has held up fairly well compared with everything overnight," Krosby said. "(Currency) hasn't been screaming 'Armageddon,' nor has the bond market."



The dollar reversed to trade more than half a percent lower, while the euro turned positive to top $1.12. Earlier, the euro fell below $1.10 to a one-month low.

Treasury yields declined, with the U.S. 10-year yield near 2.32 percent, while the 2-year yield was 0.64 percent in morning trade. The German 10-year bund yield was 0.80 percent.