Dow off 350 on Greece news; worst point drop since '13

U.S. markets got hammered Monday as the Greek debt crisis deepened, with investors pushing the Dow down 350 points — and back in the red for 2015 — after steeper sell-offs in Asia and Europe.

It's not surprising that stocks fell sharply in Asia and Europe to kick off the trading week as Greece shuttered its banks after debt talks broke down and imposed restrictions on cash withdrawals. Wall Street's reaction was less of a given, however.

Stocks took a hit on the news of no deal over the weekend between Greece and its creditors, though the losses are less than the declines in European and Asian markets.

Benchmarks, down early, sank as the day progressed. Their steep losses did not surpass those in Europe and Asia, however:

■ Dow Jones industrial average: Down 2%, or 350 points, to 17,596.35. The blue chips fell back in the red for the calendar year — the index landing 227 below its 2014 finish.
■ S&P 500: Down 2.1%, 44 points, to 2057.64
■ Nasdaq: Down 2.4%, 122 points, to 4958.47

The Dow posted its biggest point loss since it tanked 353.87 on June 20, 2013.

In Europe, Germany's DAX and France's CAC 40 nosedived 3.6% and 3.7%, respectively. The FTSE of Britain saw plenty of red, though a lot less of it, matching the Dow's 2% decline.

Among the biggest losers in Asia was the Shanghai composite, which tumbled 3.3%

How Wall Street reacts going forward to the mounting crisis in Greece and the rising odds of a Greek exit from the 19-nation eurozone could provide investors with a better sense of how vulnerable markets are.

"The U.S. is still the most important market," says Axel Merk, chief investment officer at Merk Investments.

The fact that stocks in Germany and France are down more than 3.5% and the Shanghai composite index fell another 3.3% to officially enter bear market territory was pretty much expected, as many investors had bet that a deal would get done between Greece and the institutions that lent them bailout money. But that didn't happen. For now, markets are waiting for developments to unfold, with Greek banks and its stock market closed for at least a week, as the Greeks are set to vote Sunday July 5 on whether to accept creditors "austere" bailout terms.

The ability of the U.S. stock market to limit their losses is a good sign.

That's not to say the market won't have its fair share of turbulence as fresh headlines out of Europe hit the wires. However, if Wall Street trades calmly, as it appears now, and losses don't worsen dramatically, it could act as a calming influence on world markets on a difficult day.

Most of the Wall Street experts USA TODAY spoke with don't expect a massive downdraft in the U.S. stock market. Merk, for example, says while stocks are "vulnerable" in the U.S., Greece would simply be a catalyst to sell.

U.S. stocks, of course, are still trading near record highs, and by at least one valuation metric, the price-to-earnings ratio, the market is overvalued relative to history.

Bill Hornbarger, chief investment strategist at the Moneta Group, said late Sunday night that he expects markets to be lower today, but added that the drop in the U.S. "won't be too severe."

The reason: a break down in bailout talks between Greece was never ruled out entirely by Wall Street. "This has always been a possibility," says Hornbarger.

What the markets want is a clear-cut resolution, one way or the other. And that day of reckoning is coming closer. "The markets will like some clarity," says Hornbarger.

What markets hate is uncertainty, adds Mark Luschini, chief investment strategist at Janney. And not knowing if Greece will stay in the euro or exit the 19-nation economic and political group creates a lot of angst.

"The uncertainty about the payment, let alone the surprise from (Greek Prime Minister Alexis) Tsipras to stage a referendum, is enough to create increased uncertainty as to whether Greece leaves the euro," he says.

But, for now, he doesn't see a massive swoon in the U.S. stock market, which will be viewed as a haven of sorts. What's more, the final chapter in the Greek drama has yet to play out as the referendum is six days away.

"I don't think it will be a severe selloff since nothing conclusive comes today," says Luschini. "And Europe is renown for moving to solve their issues only after a market riot."