Stocks tumble, yields drop as Greece veers toward default

Mon Jun 29, 2015 5:11pm EDT
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By Rodrigo Campos

NEW YORK (Reuters) - U.S. stocks added to a global selloff on Monday as Greece veered toward a default on its debt, while the euro recovered from an early sharp loss to turn higher against the dollar.

Greece will not pay a 1.6 billon euro loan installment due the International Monetary Fund on Tuesday, a Greek government official told Reuters, and the European Central Bank froze funding to Greek banks, forcing Athens to shut them for a week to prevent them from collapsing.

Thousands rallied behind a "No" vote in a referendum called for next Sunday on the terms of an aid deal offered to Greece by its creditors.

Talks between Athens and its creditors broke down over the weekend after Prime Minister Alexis Tsipras called the surprise referendum.

Until late last week, investors were hopeful that an 11th-hour deal would prevent a Greek default and that the impact on other markets from a possible default would be minimal.

"Could (the market) reverse itself tomorrow? It's going to take a lot of good news from Greece," said Michael  James, managing director of equity trading at Wedbush Securities in Los Angeles. "There are many factors playing into increased nervousness today through the rest of this week," he said.

The CBOE Volatility index , a measure of the premium traders are willing to pay for protection against a drop in the S&P 500, jumped as much as 39.1 percent to 19.5 points, the highest since early February. It closed up 34.5 percent at 18.86.

"When you don't know what could happen, you sell. You get on the sidelines," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago.   Continued...

Traders work on the floor of the New York Stock Exchange in New York June 25, 2015. REUTERS/Lucas Jackson