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Stocks Close Lower on EU Fears; FB Near $28

Stocks finished sharply lower Wednesday, wiping out all of the previous session's gains, as growing worries over rising bond yields in Spain and Italy and fears over Greece's possible euro zone exit kept investors on edge.

Facebook took another leg lower, with the stock finishing near $28 a share. The stock has plunged nearly 25 percent since its market debut almost two weeks ago. The social-networking giant received notice that U.S. antitrust regulators will give its proposed purchase of Instagram a lengthy investigation.

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The Dow Jones Industrial Average tumbled 160.83 points, or 1.28 percent, to close at 12,419.86, led by Alcoa and BofA . The blue-chip index is less than 2 percent from erasing all of this year's gains.

The S&P 500 fell 19.10 points, or 1.43 percent, to end at 1,313.32. The Nasdaq dropped 33.63 points, or 1.17 percent, to finish at 2,837.36.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged nearly 15 percent to finish above 24.

All 10 S&P sectors closed lower, led by energy and financials.

“There’s certainly no panic—the S&P bounced at 1,311, which is right where we’re supposed to bounce,” said Stephen Gilfoyle, trader at Meridan Equity Partners. “We’re going into two very heavy macro days in the U.S. where the focus could shift to domestic [reports]—the GDP and non-farm payrolls.”

Non-farm payrolls are expected to show a gain of 150,000 in May, according to a Reuters poll, after a small gain of 115,000 new jobs in April, the fewest in six months.

On the economic front, pending home sales dropped 5.5. percent in April to a four-month low, according to the National Association of Realtors. Economists polled by Reuters had expected a gain of 0.1 percent, after a previously reported 4.1 percent gain.

Meanwhile, the European Commission said the euro zone must move towards a banking union, issue eurobonds and boost growth while cutting debt. (Read More: 'Spexit' Will Come Before a 'Grexit': Analyst)

European shares finished sharply lowerand the euro touched a 23-month lowagainst the U.S. greenbackas investors worried that Spain's banking problems would push its borrowing costs near highs not seen since last November. And worries over Italy's borrowing costs also raised alarm, pushing the Italian 10-year bond above 6 percent.

“There isn’t a quick fix for this…we’re in a very strong downtrend,” said Andy Busch, global market strategist of BMO Capital Markets. “The very important decision that has to be made on fiscal integration, whether countries are going to give up their sovereignty—that’s highly questionable at this point so you continue to see the euro make new lows and dollar strengthen.”

Apple CEO Tim Cook said technology for televisions was of "intense interest" but stressed the company's efforts would unfold gradually, amid speculation the iPad and iPhone maker was on the brink of unveiling a revolutionary iTV.

Meanwhile, Research In Motion plunged almost 10 percent after the troubled BlackBerry maker said it hired bankers for a strategic review and to look for partnerships as the company warned it would likely report an operating loss in the first quarter. In addition, at least nine brokerages slashed their price target on the firm.

Pep Boys plunged after the automotive parts and service chain said the sale of the company to private equity firm Gores Group had been canceled.

Stanley Black & Decker is among potential bidders for private equity-owned Infastech, a Singapore-based industrial fastener maker with revenues of more than $500 million, sources with direct knowledge of the matter said.

Wynn shares rose after Goldman Sachs upgraded the gaming resort company from "neutral" to "buy."

Also on the economic front, mortgage applications fell last weekeven as rates hit another record low, according to the Mortgage Bankers Association.

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

Coming Up This Week:

THURSDAY: Challenger job-cut report, ADP employment report, GDP, jobless claims, Fed's Pianalto speaks, corporate profits, Chicago PMI, oil inventories, chain-store sales, Zipcar shareholders mtg; Earnings from Joy Global
FRIDAY: Non-farm payrolls, personal income & outlays, ISM mfg index, construction spending, auto sales, Wal-Mart shareholders mtg

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