Stocks lose steam on Greek exit worries

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NEW YORK (CNNMoney) -- U.S. stocks ended flat Tuesday, after turning sharply lower during the final hour of trading amid fears that Greece will leave the eurozone.

About an hour before the closing bell, reports surfaced that former Greek prime minister Lucas Papademos told Dow Jones Newswires that Greece is considering making preparations to leave the eurozone.

The euro sank on the news, falling more than 1% against the dollar, and pulled stocks down with it.

Earlier, strong U.S. housing data boosted stocks.

"Investors were able to concentrate on what was happening in the U.S., said Kim Forrest, senior equity analyst at Fort Pitt Capital Group. "But I guess Greece came back with a vengeance."

After being up almost 1% earlier in the day, the S&P 500 (SPX) sank as much as 0.5%. The broad index managed to recover by the closing bell, finishing the day up less than 1 point, or 0.1%.

The Dow Jones industrial average (INDU) and Nasdaq (COMP) also tumbled following the Greek news. Both indexes bounced back from their lowest levels of the day but still finished in the red. The Dow slipped 2 points for the day, while the tech-heavy Nasdaq lost 8 points, or 0.3%.

Investors will continue to focus on developments out of Europe.

The region's leaders are due to meet Wednesday in an ad hoc summit to address the latest problems with European sovereign debt, worries that Greece is moving closer to leaving the eurozone, and the contagion effects an exit might have on other economies.

U.S. stocks bounced back from their worst week of the year Monday, on renewed optimism that European leaders would find a way out of the sovereign debt crisis.

Economy: Following the opening bell, the National Association of Realtors said that existing home sales rose 3.4% in April to an annual rate of 4.62 million, up 10% year-over-year. Home affordability also came in at record levels.

"These sales levels are still relatively low, but a home is a big ticket item, and to see improvement in the housing market is always good," said Forrest. "It shows that buyers think their prospects are solid enough to agree to a mortgage."

The Organization for Economic Cooperation and Development cut its forecasts for the eurozone economy to a decline of 0.1% this year, and warned that sovereign debt problems pose a risk to the global economic recovery.

World markets: A report showing ebbing inflation in the United Kingdom raised hopes that lower price pressures might allow leaders to move toward more stimulus to respond to economic weakness.

European stocks ended higher. Britain's FTSE 100 (UKX) rose 1.9%, while the DAX (DAX) in Germany gained 1.7% and France's CAC 40 (CAC40) jumped 2.2%.

Fitch downgraded Japan, the world's No. 3 economy, and suggested further downgrades could be coming.

Asian markets ended before the Japan downgrade was announced. The Shanghai Composite (SHCOMP) rose 1.0%, the Hang Seng (HSI) in Hong Kong gained 0.6% and Japan's Nikkei (N225) climbed 1.1%.

Companies: Bank stocks were among the biggest gainers Tuesday, with shares of JPMorgan Chase (JPM, Fortune 500) rising almost 5%. Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500) rose more than 2%, while Morgan Stanley (MS, Fortune 500) and Goldman Sachs (GS, Fortune 500) added about 1%.

Best Buy (BBY, Fortune 500), which has been hit by a scandal that cost the CEO his job, along with store closings during the most recent quarter, reported solid earnings even as same-store sales fell 5.3%. The retailer also reaffirmed its earnings guidance of $3.50 to $3.80 a share, excluding restructuring charges. Analysts are only looking for earnings of $3.58 a share this year.

AutoZone (AZO, Fortune 500) also reported better than expected earnings of $6.28 a share, but weaker than expected revenue sent its shares lower.

Williams Sonoma (WSM) reported earnings per share of 34 cents excluding special items, which came in better than forecasts and year-earlier results. The retailer raised its earnings guidance for 2012.

Shares of Urban Outfitters (URBN) popped after the retailer topped earnings expectations.

Polo Ralph Lauren's (RL, Fortune 500) stock also edged up after the company's profit rose 29% on strong revenue and same-store sales growth. The company also doubled its quarterly dividend. But the company's revenue guidance for fiscal 2013 came in below expectations.

Shares of Dell (DELL, Fortune 500) tumbled in after-hours trading Tuesday after the computer maker posted a profit that was below Wall Street's expectations, and also issued a disappointing forecast for the second quarter, amid weak PC sales.

Currencies and commodities: The euro sank on the Greek news, falling more than 1% against the dollar. Earlier it was only off between 0.5% and 0.7%.

Oil for July delivery fell $1.38 to settle at $91.48 a barrel.

Gold futures for June delivery fell $22.10 to settle at $1,566.60 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury slid, pushing the yield up to 1.79% from 1.74% late Monday.