U.S. stocks closed mostly lower on Wednesday on news that the European Central Bank revoked a waiver that allowed banks to use Greek government debt as collateral for loans. Only the Dow Jones Industrial Average managed to close higher by 0.04 percent.
Just before the news around 3:30 p.m., stocks had turned positive with the Dow jumping more than 100 points. The Dollar, Euro, and U.S. 10-year all spiked going into the close.
"News out of the Greece negotiation process is causing investors to take profits," said Art Hogan, chief market strategist at Wunderlich Securities.
"The European Central Bank is telling the Greek banking system that it will no longer accept Greek bonds as collateral for any repurchase agreement the Greek banks want to conduct," said Peter Boockvar, chief market analyst at The Lindsey Group, said in a note.
"This is because the ECB only accepts investment grade paper and up until today gave Greece a waiver to this clause. That waiver has now been taken away and Greek banks now have to go to the Greek Central Bank and tap their Emergency Liquidity Assistance facility for funding," he said. "This news will like scare depositors and result in further bank runs. This all said, if Greece can come to an agreement with the troika, I'm sure the ECB will reinstate the waiver."
Donald Luskin, chief investment officer at TrendMacro, played down the news.
"If you put both of today's policy moves together (revoking the waiver and adding the Emergency Liquidity Assistance fund), what it means is that the Greek government—not the Eurosystem—will be on the hook for collateral. But there will still be a funding mechanism for the banks, in case there is a serious run on them," he said. "That's the important thing."
U.S. stocks held up relatively well for much of the day despite pressure from significant declines in oil.
"I don't think in this entire cycle (we've had a day) where oil's been off and markets stayed (mostly) up," Hogan said. "I think it's a testament to better economic data, ISM figures and auto sales."
Crude oil futures settled down nearly 9 percent below $49 a barrel, erasing almost all the big gains from the past two days.
"The market knows we need some stabilization in energy prices for the economy to grow," said Nick Raich, CEO of The Earnings Scout.
Oil prices have fallen around 50 percent from a high of $114 a barrel last June on the back of an over-supply and lack of demand.