U.S. stocks suffered big losses on Monday as the deterioration of Greek debt crisis rattled market sentiment.
The Dow Jones Industrial Average dropped 350.33 points, or 1.95 percent, to 17,596.35. The S&P 500 shed 43.85 points, or 2.09 percent, to 2,057.64. The Nasdaq Composite Index dived 122.04 points, or 2.40 percent, to 4,958.47.
Greece was in shock on Monday as it woke up to closed banks, capital controls and an increasingly imminent default risk, situations which politicians, analysts, media and ordinary people had feared for.
The leftist government's decision on Saturday to call a referendum on July 5 to decide whether to accept the stringent terms the creditors had tabled was a catalyst to a string of developments over the weekend.
After the collapse of five-month negotiations, Eurogroup told Athens that the extended bailout that kept the country afloat since 2010 expired on June 30, as agreed in February. The European Central Bank followed by freezing the extra emergency funding for Greek banks.
Meanwhile, Standard & Poor's Ratings Services lowered its foreign and local currency long-term sovereign credit ratings on Greece to 'CCC-' from 'CCC', citing that the probability of Greece exiting the eurozone is now about 50 percent.
Dampening investor sentiment, global stock markets witnessed heavy sell-offs on Monday. European equities dived on Greece uncertainty, with Spanish stock market index Ibex-35 plummeting 4. 56 percent.
In Asia, Tokyo stocks plunged as investors feared Athens would default on an upcoming repayment, with the 225-issue Nikkei Stock Average dropping 2.88 percent, its biggest points drop this year.
Chinese shares also saw sharp fluctuations on Monday despite unexpected rate cuts from the central bank rolled out on Saturday, with the benchmark Shanghai Composite index shedding 3.34 percent.
On the economic front, U.S. pending home sales continued to rise in May. The Pending Home Sales Index climbed 0.9 percent from 111.6 in April to 112.6 in May, the highest level in over nine years, according to the National Association of Realtors.
Investors will also keep a close eye on Thursday's nonfarm payrolls report for further indications on the timing of a rate hike.
The CBOE Volatility Index, often referred to as Wall Street's fear gauge, soared 34.45 percent to end at 18.85 Monday.
In other markets, oil prices lost Monday amid renewed uneasiness over Greece debt crisis after the country closed its banks to control capital outflow.
The U.S. benchmark, West Texas Intermediate for August delivery moved down 1.3 U.S. dollars to settle at 58.33 dollars a barrel on the New York Mercantile Exchange. The global benchmark, Brent crude for August delivery decreased 1.25 dollars to close at 62.01 dollars a barrel on the London ICE Future Exchange.
The U.S. dollar slipped against most major currencies on Monday as investors were awaiting the country's closely-watched employment report due out on Thursday.
In late New York trading, the euro rose to 1.1248 dollars from 1.1160 dollars in the previous session, while the dollar bought 122.46 Japanese yen, lower than 123.85 yen of the previous session.
Gold futures on the COMEX division of the New York Mercantile Exchange rose on Monday as the situation in Greece destabilized, driving investors to gold as a safe haven.
The most active gold contract for August delivery rose 5.8 dollars, or 0.49 percent, to settle at 1,179 dollars per ounce.