Stocks Fall 1% Amid Greece Fears; Pandora Up

Stocks tumbled Wednesday, led by banks, following a handful of weaker-than-expected economic news and amid worries over renewed concerns over the Greek debt situation.

The Dow Jones Industrial Average plunged more than 100 points to trade below the psychologically-important 12,000 mark, after posting its biggest gain in almost two monthsduring the previous session.

Most blue-chip stocks were in the red, led by BofA, Home Depot and JPMorgan .

The S&P 500 and the tech-heavy Nasdaq were also lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged almost 10 percent to trade above 20.

All key S&P sectors were in the red, led by energy, financials and techs.

“The selloff seems to be centered around Greece,” according to Joe Saluzzi, co-manager of trading at Themis Trading. “More importantly, we need to know how they are going to settle [the situation].”

"Stocks are likely to be lower at the end of the year than they are now," David Levy, director and chairman of the Jerome Levy Forecasting Center told CNBC, adding that stocks have not priced in the "true nature of the danger" from the European debt situation or the coming slowdown.

"And going further out, I'm more pessimistic," siad Levy.

Stocks tumbled amid worries over increased turmoil on the Greece's debt situation, after euro zone officials failed to forge a deal about Greek aid. Euro zone ministers will meet again next week to find an agreement, with the voluntary involvement of private investors the main sticking point.

Adding to the woes, a gauge of manufacturing in New York State showed the sector unexpectedly contracted in June in another sign the economic slowdown could become more protracted, according to the New York Federal Reserve.

Also, homebuilder sentiment fell unexpectedly in June to its lowest level since September 2010, according to the NAHB. The index fell to 13 in June from 16 in May, while a Reuters poll of economists had expected the level to hold at 16.

"We think it's time to start building positions in what we think may be a better 2012," Megan McGrath of MKM Partners told CNBC. "We'd rather stick to companies that are making money already, or who are very close to making money."

MKM just initiated coverage of the homebuilders with buy ratings on D.R. Horton, Pulte Homes, Toll Brothers and Lennar. The firm has a "neutral" rating on KBHome and Ryland and has a "sell" rating on Hovnanian.

Pandora soared almost 40 percent at its market debutafter the Internet-radio company initially priced its IPO at $16 a share. Meanwhile, Maxim Group started coverage of the firm with a "buy" rating.

Traders were turning to the U.S. dollar as a safe haven, boosting the greenback against a basket of global currencies. Oil prices remained lowerafter a government data showed crude inventories fell and following a higher-than-expected U.S. inflation report. U.S. light, sweet crude slipped below $99 a barrel, while London Brent crude fell to near $118..

Banks were among the biggest losers with Citigroup and Wells Fargo slipping almost 2 percent each.

JPMorgan slid after the bank agreed to pay $27 million to settle allegations that the firm's auto lending unit used high-pressure sales methods and false statements to sell products.

Discover Financial was among the rare gainers in the sector after the credit-card issuer declared a dividend and following news that borrowers were more timely in their payments in May.

Nokia fell, giving back most of its gains from Tuesday following news that the mobile phone maker had settled long-standing patent disputes with Apple.

Pfizer declined after U.S. and British researchers said a mist inhaler made by the pharma giant used by people with lung diseases increase their risk of dying by 52 percent.

Johnson & Johnson said it would stop development of its Nevo heart stent and cease manufacturing of its Cypher stent, pulling back on a business that has dragged down the drugmaker's earnings in recent years.

Carnival slipped after Nomura cut its price target on the cruise line leader.

Meanwhile, Boeing edged higher after the aircraft manufacturer announced that it is planning to raise its planned production rate for the 737 aircraft to 42 jets per month in 2014, up from its current rate of 31.5.

In other economic news, consumer price index rose slightly in May, according to the Labor Department. Also, industrial output edged up a notch in May as supply chain disruptions from the Japan earthquake disrupted auto production for a second straight month, according to the Federal Reserve.

And the Mortgage Bankers Association said refinancing requests pushed home loan applications to their highest level in three months.

Fed chairman Ben Bernanke warned on Tuesday that a failure to lift the government's $14.3 trillion debt ceiling risks a potentially disastrous loss of confidence in America's creditworthiness.

European stocks closed loweramid renewed concerns over Greece's debt crisis and contagion fears.

On Tap This Week:

WEDNESDAY: Oil inventories, credit card default rates reported, Dell shareholder mtg
THURSDAY: Housing sales, jobless claims, current account, Philadelphia Fed survey, Fed's Fisher speaks, money supply; earnings from Kroger, Pier 1 Imports, Smithfield Foods, Research In Motion
FRIDAY: Consumer sentiment, leading indicators, quadruple witching

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