Stocks End Flat Amid Renewed Greece Woes

Stocks erased most of their gains to finish flat Tuesday following reports that former Greek Prime Minister Lucas Papademos said preparations for Greece's exit from the euro zone are being considered.

Still, all three major averages managed to end off their worst levels after an initial sharp drop following the report.

Papademos also cautioned that dropping the single currency would have "catastrophic" economic consequencesfor the debt-ridden nation and the rest of the euro zone.

S&P 500

The Dow Jones Industrial Average erased 1.67 points, or 0.01 percent, to close at 12,502.81. Alcoa led the Dow laggards, while JPMorgan and BofA closed higher.

The S&P 500 eked out a gain of 0.64 points, or 0.05 percent, to end at 1,316.63. The Nasdaq slipped 8.13 points, or 0.29 percent, to finish at 2,839.08.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended above 22.

The euro extended losses against the greenback following the news to trade well below $1.27.

“We’re swamped by all these headlines,” said Brian Battle, vice president of trading at Performance trust Capital Partners of the day’s choppiness. “The technical argument is that we’re due for a rally, but fundamentally our stocks are still overvalued…it’s hard to imagine that stocks can really go up in this environment at all.”

Facebookdeclined againafter tumbling almost 11 percent in the previous session amid doubts over the company's valuation after Reuters reported that an analyst at Morgan Stanley cut his revenue forecastson the social networking giant days before the offering. Morgan Stanley was the lead underwriter for Facebook's IPO. (Read More: Facebook's Flop—Why Stock's Early Slump May Not Matter)

Best Buy finished higher after the consumer-electronics retailer reported better-than-expected quarterly sales and earnings, while maintaining its outlookfor the year.

On the economic front, existing home sales rose 3.4 percent to an annual rate of 4.62 million units in April to their highest in almost two years, according to the National Association of Realtors.

“We’re seeing more evidence of a bottom in the housing market,” said Dwight Johnston, chief economist at the California and Nevada Credit Union Leagues, but noted that the NAR’s report is not the most reliable indicator. “It’s not the kind of market that’s going to see a huge swing to the upside, but there will be stability in the real estate market.”

Stocks were mixed at the open after Fitch ratings agency downgraded Japan’s credit rating from triple A to double A+ with a negative outlook, on fears that the country’s public debt will reach 239 percent of its gross domestic product by the end of the year. Japanese Finance Minister Jun Azumi saidthe government would make efforts to implement social welfare and tax reforms.

European shares ended higheramid hopes that euro zone leaders will reach some form of agreement on a policy response to the debt crisis when they meet in Brusselson Wednesday.

Meanwhile, the Organization for Economic Cooperation and Development (OECD) projected that global growth would ease to 3.4 percent this year from 3.6 percent in 2011. The group also showed support for Eurobonds—a policy that new French President Francis Hollande raised over the weekend.

Google completed its acquisitionof Motorola Mobility in a deal worth $12.5 billion and chose a new CEO for the cellphone maker.

Express plunged almost 30 percent after the apparel retailer posted lower-than-expected results and slashed its full-year earnings forecast. Urban Outfitters rallied after the clothing retailer topped earnings expectations.

Dell and Take Two are scheduled to report earnings after the close.

Patriot Coal tanked amid rumors the struggling coal producer has hired bankruptcy advisors. The company also reiterated that it has a commitment for a revolving credit line of $625 million. Rivals Arch Coal and Alpha Natural were also lower.

Bayer and Onyx Pharmaceuticals failed to show in a late-stage clinical study that their blockbuster drug Nexavar can prolong the lives of patients with lung tumors, the largest target group in the cancer market.

Treasury prices held their lossesafter the government auctioned $35 billion in 2-year notes at a high yield of 0.300 percent and bid-to-cover of 3.95.

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

Coming Up This Week:

WEDNESDAY: Weekly mortgage apps, FHFA home price index, oil inventories, 5-yr note auction, Minneapolis Fed's Kocherlakota speaks, CME shareholders mtg, Kraft shareholders mtg; Earnings from Hewlett-Packard, Big Lots, Toll Brothers, NetApp, Pandora
THURSDAY: Durable goods orders, jobless claims, 7-yr note auction, BlackRock shareholders mtg, Goldman Sachs shareholders mtg, McDonald's shareholders mtg; Earnings from Costco, Tiffany
FRIDAY: Consumer sentiment, USDA food prices outlook

More From