NEW YORK (TheStreet) -- U.S. stock futures were falling as talks over the weekend between Greece and its creditors broke down, leaving the country on the brink of default. Greek banks have been shut until next week.
S&P 500 futures lost 1%, Dow Jones Industrial Average futuresfell 0.99% and Nasdaq futures declined 1.18%.
Greece announced plans over the weekend to call a referendum to allow citizens to decide if the debt-laden nation should exit the eurozone. This comes after talks between Greece and its creditors failed on Saturday. Banks in Greece remain closed until July 6 and citizens are limited to ATM withdrawals of 60 euros per day.
"The odds favor an eventual deal, but the probability of unintended consequences leading to a Greek euro exit has increased and is now at 20%, in our view," wrote Luigi Speranza of BNP Paribas in a Monday note. "We expect a knee-jerk reaction from the markets when they open on Monday and expect them to price in a far larger chance of Greece leaving the euro."
European stocks sunk on the news. London's FTSE 100 was down 1.7%, Frankfurt's DAX slipped 3.1%, and Paris's CAC 40fell 3.4%. The fears sent the euro down 0.35% against the dollar. European banks including Deutsche Bank (DB) - Get Report fell 5.6%, while BNP Paribas (BNPQY) traded lower by 5.3%.
"There will be two types of money taking action: those trying to profit from the end of Greece and those caught on the wrong side of it," said TheStreet's Jim Cramer in a story on Monday. "Neither should be met with your buying, because it would be foolish to help out either cohort. The first, the profiteering hedge funds, want to get a short off as low as down 1%, hoping that S&P will fall 2% minimum, so they can make a decent return."
Meanwhile, stocks in China entered bear market territory, with the Shanghai Composite down 3.34% and the tech stock index, the Shenzhen, falling more than 6%. This comes as the People's Bank of China announced a rate cut on Monday. Stocks in Tokyo fell 2.88%, while Hong Kong's Hang Seng dipped 2.61%.
Adding to global fears is Puerto Rico's debt crisis following Gov. Alejandro Garcia Padilla's comments that the island's $72 billion in debt is "not payable."
Brean Capital's Peter Tchir thinks the fallout from Puerto Rico's debt woes could be worse than Greece's. "While Greece is not well-owned by hedge funds - Puerto Rico is," he wrote in a Monday note. "Greece can go all sorts of ways, but will have very little direct impact on anyone's P&L (a 1% move in the S&P 500 is not a "big" reaction). It will definitely not affect anyone's decision to wake up today and buy a toy for their kids, or a tractor for their work."
Plus, crude prices slipped below $60 per barrel, reaching $59.02 a barrel, a decline of 1.1%.
JPMorgan Chase (JPM) - Get Reportshares moved lower after the analysts at Oppenheimer & Co. downgraded the banking giant to "perform" from "outperform" on the heels of valuations moving ahead of fundamentals. Shares of Citigroup (C) - Get Report fell 2.2%, while Bank of America (BAC) - Get Report slipped 1.4%.