NEW YORK ( TheStreet) -- Stocks posted their largest one-day decline of the year Friday as fears of a disorderly Greek default and signs of global economic slowdown dinged sentiment.
The Dow Jones Industrial Average was dropped 89.2 points, or 0.7%, to 12,801. The S&P 500 slid 9.3 points, or 0.7%, to 1,343, to snap a five-week rally, and the Nasdaq erased 23.4 points, or 0.8%, at 2,904.
As market uncertainty ticked up Friday, the CBOE Volatility Index rose 12% to 20.78.
In Greece, trade unions have begun a two-day strike protesting the austerity measures required to secure an urgently-needed second, € 130 billion ($172 billion) bailout package from the country's European creditors including the International Monetary Fund.Although an official statement from Greece yesterday said that leaders backing Greece's coalition government had reached an austerity agreement, eurozone finance ministers shot down the € 3.3 billion package, rejecting it as incomplete. They say they still need to see an additional €325 million ($430 million) in cuts to this year's budget, a passage of those cuts through parliament and a written guarantee that those cuts would be executed after the scheduled April general elections. Greece's lenders are giving the country until the middle of next week to fulfill these demands -- or face losing the bailout, a chaotic default in March and an exit from the euro. Greek far-right leader George Karatzaferis said Friday that he will refuse to support the tough measures, decrying the way that Greece's European partners are treating the country as "humiliating." At least four Greek ministers have already resigned in protest over the new austerity package. "Greeks will almost surely have to vote this weekend on the agreement, enshrining it in law and further ..." says Dan Greenhaus, chief global strategist, BTIG. "Not surprisingly, this is going to be quite difficult, although not impossible." The International Energy Agency slashed its full-year global oil demand projection for this year for the sixth month in a row citing a "darkening" economic outlook and sparking concerns about global growth. The IEA cut its estimates on global oil demand following a "sharp deterioration" of economic growth forecasts by the International Monetary Fund in January. The Paris-based agency said that global crude consumption will rise by 800,000 barrels a day, or 300,000 less than previously forecast, to 89.9 million barrels a day, as consumption declines in most developed countries this year amid the looming pressure of Europe's sovereign debt crisis. Every 7/10 decline in European economic growth shaves off 3/10 from U.S. growth, according to UBS. "An uneasy balance characterized oil markets in January, with tensions surrounding Iran counteracting a weaker economic outlook," the IEA said. China also reported that imports and exports fell more than anticipated in January, marking the first declines in two years. Exports fell 0.5% and imports fell 15.3%. In the U.S., the Thomson Reuters/University of Michigan Survey of Consumers report said that February's preliminary consumer sentiment index came in at 72.5, which was a dip from 75 in the final January report. The latest reading was a disappointment to economists who expected 74.5, according to Thomson Reuters. In other domestic economic news, the Commerce Department reported that the country's international trade deficit increased to $48.8 billion from a revised $47.06 billion in November, suggesting that the nation's trade deficit still is not under control. The December deficit was the highest since June of last year although it was roughly in line with the $48 billion that economists expected, according to a poll by Thomson Reuters. "Today is nothing more than a healthy pullback," says James "Rev Shark" DePorre, founder and CEO of Shark Asset Management. "The biggest positive for the bulls is that they have been anticipating weakness for so long, so this isn't exactly a big surprise that catches folks leaning the wrong way."
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