Stocks plunged sharply Tuesday to close at session lows amid jitters over the euro zone's ability to find a solution to the ongoing debt crisis.
“I’m shocked stocks aren’t actually lower today,” said Brian Battle, vice president of trading at Performance Trust Capital Partners, citing the final hour's sell off to traders' reluctance to hold positions overnight ahead of the summit.
The Dow Jones Industrial Average dropped 207 points, or 1.74 percent, to close at 11,706.62. 3M and Alcoa led were the biggest laggards on the blue-chip index.
The S&P 500 slumped 25.14 points, or 2 percent, to end at 1,229.05. The Nasdaq fell 61.02 points, or 2.26 percent, to finish at 2,638.42.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, soared more than 10 percent to close above 32.
All 10 S&P sectors finished firmly in the red, led by financials and materials.
“The market was a little overheated and anticipating a lot of optimistic news out of Europe that probably isn’t that likely in the near future,” Adam Parker, managing director and U.S. equity strategist at Morgan Stanley told CNBC.
Stocks extended their losses after news that EU finance ministers will not meet before Wednesday's summit, although the summit itself is still set to take place. Reuters reported that the finance ministers meeting was canceled because the details of the issues to be discussed had not been finalized, quoting EU sources.
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“I fear that [the euro zone] will ask the U.S. for help when they come to a dead end and the greater fear is that we will say yes!” said Battle.
Investors were also nervous after Germany's Chancellor Angela Merkel said she is opposed to a phrase in a draft conclusion for Wednesday's EU summit that calls for the ECB to continue buying bondsin the secondary market. European shares declined following the news.