Renewed worries over Greece sink stocks

The latest setback in Greece's financial crisis sent the Standard & Poor's 500 index to its lowest level of the year, putting it on the edge of a new bear market.

The index, the benchmark for most U.S. stock funds, has fallen 19.4 percent since its high for the year on April 29. A 20 percent drop would signify the start of a bear market, ending a bull market that began in March 2009. The S&P 500 has gained 76 percent since then, including dividends.

European markets slumped, dragging U.S. stocks down along with them, after Greece said it will miss deficit reduction targets it agreed to as part of its bailout deal. Benchmark indexes in Germany, France and Spain all fell 2 percent.

The Dow Jones industrial average fell 258.08 points, or 2.36 percent, to 10,655.30. The S&P 500 lost 32.19, or 2.85 percent, to 1,099.23. That's below its closing low of 1,119 for the year, reached on Aug. 8.

Indexes measuring smaller stocks fell even more than the Dow and S&P, which are dominated by large companies. The Nasdaq composite slid 79.57, or 3.29 percent, to 2,335.83. The Russell 2000 index of small companies plunged 34.67 to 609.49.

All 10 company groups in the S&P index fell. Banks, energy, and consumer discretionary stocks had the steepest declines. The yield on the 10-year Treasury note fell to 1.75 percent from 1.91 percent late Friday as investors piled into lower-risk investments.

"The market is continuing to trade based on what is happening in Europe, and that is going to overshadow everything else," said Quincy Krosby, market strategist at Prudential Financial. "The math [for the Greek bailout] didn't add up a year ago, and the math doesn't add up today. The market knows that and is waiting for the Europeans to acknowledge it."

The renewed concerns about Europe's debt problems pushed the euro down to $1.32 versus the dollar, a 9-month low. The stronger dollar could hurt large U.S. companies that rely on exports by making their products more expensive overseas.