Tomorrow is official default day for Greece but today was the day everything fell through the floor, the Dow diving a massive 350 points, the biggest drop since October, wiping out all the year's gains.  Yesterday the government ordered the banks shuttered for Sunday and Monday so the only banking that could be done was with ATMs, and there were instant lines around the block for those.  But the ECB was committed to supplying emergency cash to the banks so that there would be no panic.  Things were relatively calm yesterday but today the ECB reversed its position and shut off the flow of cash.

This caused the government to take additional cautionary measures and extended the shutdown through the week with, of course, no hint that it would end even then.  Today even the ATM machines were shuttered for half a day and then reopened to allow customers to withdraw just 60 euros.  This is the ration that the Greek people will have to live on until this is over -- 60 euros per day.  There was thus a run on supermarkets and other staples stores, none of which is faring well for the country's outlook after tomorrow.  Both sides continue to lay blame on the other, the European creditors insisting they are still open for negotiations and calling Greece's change of heart a betrayal, the Greek negotiators mad as hell about what they say are draconian last minute demands from the creditors which they call a betrayal.  Meanwhile the U.S. is urging both sides to grow up and settle this affair like grown ups.  Tensions are so high that the volatility index rocketed up 35% in one day.  In one day, sentiment has also reversed itself from 60/40 expecting Greece to stay in the euro to 60/40 against.  There is still a minority in the smart money ranks who think there's going to be a last minute deal tomorrow, but most are expecting a Grexit.  I am among the optimists.  We'll see soon enough.  Volume was considerable above average at 7.3 billion.

Markets | Mon Jun 29, 2015 7:25pm EDT

Wall St. tumbles as investors flee equities on Greek debt crisis

BY SINEAD CAREW

DJ:     17,596.35  -350.33      NAS:      4,958.47  -122.04       S&P:      2,057.64  -43.85

(Reuters)  U.S. stocks fell sharply in heavy trading on Monday and the S&P 500 and the Dow had their worst day since October after a collapse in Greek bailout talks intensified fears that the country could be the first to exit the euro zone.

The European Central Bank froze funding to Greek banks, forcing Athens to shut banks for a week to keep them from collapsing.

And Greece appeared to confirm it was heading for a default after a government official said the country would not pay a 1.6 billon euro loan installment due to the International Monetary Fund on Tuesday.

U.S. investors also worried about Puerto Rico's debt problems and a bear market in China the day before quarter-end and ahead of Thursday's U.S. jobs report and the long weekend for U.S. Independence Day.

"None of that bodes well for people stepping in and buying the dips as has been the mentality most of the year," Michael James, managing director of equity trading at Wedbush Securities in Los Angeles who said U.S. shares could fall again Tuesday.

"Could that reverse itself tomorrow? It's going to take a lot of good news from Greece," he said noting that portfolio managers would not want to show risky equities on their books at the end of the second quarter.

The S&P and Dow Jones Industrial Average .DJI had their worst days since Oct. 9 and both turned slightly negative for the year to date. The last annual decline for both indexes was 2008. The Nasdaq had its biggest one-day percentage decline on Monday since March 25.

Volatility rose sharply and all 10 S&P sectors retreated while the Global X FTSE Greece exchange-traded fund (GREK.K), which tracks the Athens stock market, fell 20 percent. In Europe, the blue-chip Euro STOXX 50 index .STOXX50E had suffered its biggest one-day fall since 2011.

"There is no mechanism to be ejected from the European Union. This has never happened before," said Brian Battle, director of trading at Performance Trust Capital Partners in Chicago. "When you don't know what could happen you sell. You get on the sidelines."

While the Greek economy is small and most U.S. corporations have limited direct exposure, investors are concerned about the fallout across Europe if Greece exits the euro zone.

A snap Reuters poll of economists and traders found a median 45 percent probability that Greece would leave the euro zone.

Chinese stocks had closed sharply lower after a volatile day of trading despite surprise monetary easing by the central bank.

On top of this, U.S. territory Puerto Rico faces a restructuring of its $73 billion debt burden.

The Dow Jones industrial average .DJI fell 350.33 points, or 1.95 percent, to 17,596.35, the S&P 500 .SPX lost 43.85 points, or 2.09 percent, to 2,057.64 and the Nasdaq Composite .IXIC dropped 122.04 points, or 2.4 percent, to 4,958.47.

The CBOE Volatility index .VIX, a measure of the premium traders are willing to pay for protection against a drop in the S&P 500, jumped 34.5 percent to 18.86, its highest level in almost five months.

Financials .SPSY was the worst S&P sector with a 2.44 percent decline. U.S. banks have an exposure to $12.7 billion of Greek debt.

JPMorgan Chase (JPM.N), down 2.5 percent, was the biggest drag on the S&P financial sector followed by Wells Fargo (WFC.N), down 2.4 percent. Goldman Sachs (GS.N) weighed the most on the Dow with a 2.6 percent decline.

Assured Guaranty (AGO.N) fell 13.3 percent and MBIA Inc (MBI.N) fell more than 23.4 percent after BTIG downgraded the insurers on concerns over Puerto Rico's debts.

Declining issues outnumbered advancing ones on the NYSE by 2,874 to 282, for a 10.19-to-1 ratio on the downside; on the Nasdaq, 2,469 issues fell and 367 advanced for a 6.73-to-1 ratio favoring decliners.

The benchmark S&P 500 index was posting 2 new 52-week highs and 25 new lows; theNasdaq Composite was recording 48 new highs and 126 new lows.

About 7.3 billion shares changed hands on U.S. exchanges, compared with the 6.3 billion average for the month-to-date, according to data from BATS Global Markets.