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Dow, S&P Down for 5th Day on Greece Worries

Stocks extended their losses in the final hour of trading to close near lows Thursday, after Fitch took negative action on Greece's ratings and following several disappointing economic reports.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged almost 10 percent to close above 24, hitting a five-month high.

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The Dow Jones Industrial Average tumbled 156.06 points, or 1.24 percent, to close at 12,442.49, led by JPMorgan and Caterpillar , logging its 11th down day in the last 12 sessions.

Wal-Mart was the biggest gainer on the index.

The S&P 500 slumped 19.94 points, or 1.51 percent, to end at 1,304.86. Nasdaq plunged 60.35 points, or 2.10 percent, to finish at 2,813.69.

Most key S&P sectors ended in negative territory, led by consumerdiscretionary, while telecoms edged higher.

Fitch downgraded Greece by one notch to CCC from B- amid "heightened risk" that the debt-ridden nation may be forced to exit the euro zone. This comes after ECB said it had ceased providing liquidity to some Greek banks due to their failure to recapitalize.

Investors had been on edge over the euro zone after a report that Moody's told a number of Spanish banks that it will lower their ratings, according to a Spanish newspaper, citing sources. This comes after the agency cut the ratings of 26 Italian lenders earlier this week. Spain's 10-year yields spiked back above 6 percent.

“This dollar strength has not been good for the markets overall,” noted Bob Iaccino, founder of TraderOutlook.com. “As a trader, I’m looking at about 1,285 [on the S&P 500] as a safe place to buy. I know it’s a lot lower [than current levels], but it doesn’t mean I’m shorting—just means I’m not comfortable buying for a longer-term position.”

Meanwhile, gold prices surged more than 2 percent to trade above $1,570 an ounce, bouncing off a 4-1/2 month low and seeing their best intraday session in 2012.

On the economic front, leading indicators fell for the first time in seven months, according to the Conference Board. Economists And the pace of factory activity in the mid-Atlantic region unexpectedly contractedin May, according to the Philadelphia Federal Reserve Bank.

Claims for unemployment benefits were unchanged last week, holding steady at a seasonally adjusted 370,000 rate, according to the Labor Department.

Apple slumped almost 3 percent, falling more than 8 perecnt in the last month, losing about $104 billion in market cap.

H-P is said to be planning layoffs between 8 and 10 percent of its workforce, according to reports, affecting over 32,000 positions. Shares were slightly higher. The firm is slated to post earnings after-the-bell next Wednesday.

JPMorgan fell after reports the bank's trading losses have surged in recent days, topping the initial $2 billion estimate. The Senate Banking Committee called CEO Jamie Dimon to testify as early as next month. Meanwhile, analyst Meredith Whitney of Meredith Whitney Advisory Group told CNBC that the bank's fallout "could get a lot worse."

Fellow Dow component Caterpillar also declined after the heavy equipment maker posted slowing sales growth in Apirl, with the biggest deceleration from the Asia-Pacific region.

Among earnings, Wal-Mart rallied after the big-box retailer reported better-than-expected quarterly resultsand posted a gain in same-store sales.

Sears surged after the retailer said it plans to spin offa large part of its stake in its Canada unit to better focus on its U.S. business. The firm also posted a narrower-than-expected loss.

Aeropostale , Gap , Applied Materials and Marvell Tech are among notable companies slated to post earnings after-the-bell tonight.

Tiffany edged higher after the upscale jeweler raised its dividend by 10 percent to 32 cents a share from 29 cents a share, the firm's 11th increase in the last 10 years.

Media General surged after Warren Buffett's Berkshire Hathaway said it will purchase the majority of the newspaper company for $142 million in cash in addition to providing the firm with a $400 million loan and a $45 million credit line.

Facebook’s price range for its IPO has been finalized and will be determined after the market close, according to sources. The company has seen strong demand for shares, and has re-filed twice in the last two days to increase the size and potential price of the offering. Facebook is set to begin trading Friday on the Nasdaq under the ticker “FB”.

—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

Coming Up This Week:

FRIDAY: Facebook begins trading, JCPenney shareholders mtg, G8 summit begins; Earnings from Ann

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