NEW YORK ( TheStreet) -- Traders, wracked with fear that Greece's sovereign debt woes could spread to neighboring nations, sent stocks tumbling hard Tuesday, pushing the dollar to new highs against the euro and sending blue-chip stocks plunging over 200 points. The Dow Jones Industrial Average saw 225 points, or 2%, evaporate during one of its most downbeat sessions of the year, ultimately finishing at 10,927. The S&P 500 lost 29 points, or 2.4%, to 1174, and the Nasdaq declined by nearly 75 points, or 3%, to finish at 2424. "The strong dollar is biting into risk appetite with the euro plunging this morning on contagion fears about sovereign debt problems in Europe," said Peter Cardillo, chief market economist at Avalon Partners. "We had some good economic numbers out today, which is basically helping the market to stabilize at the low end of the range. "There's a lot of volatility, and I suspect that this is going to continue as long as we have this fear factor of the sovereign debt worsening," Cardillo said. "The good news is that the market seems to be trading in a volatile range, but it's not breaking down, so it's a good indication that we're probably headed higher before we're headed lower." Global markets were roiling with doubt that Greece's rescue package would be enough to ease contagion fears, and the euro slumped to new lows against the dollar . The Chicago Board Options Exchange Volatility Index, thought of as a barometer of fear in the market, also reentered the commentary today, jumping over 24% at one point. "We're coming off of the 15 level, which is the lowest we've been in a long time. What happened in the last week is the ranges of where it's been have broadened out dramatically," said Marc Pado, U.S. market strategist at Cantor Fitzgerald, noting the VIX is confirming his theory of dwindling conviction and a correction heading into a seasonal summer slowdown. "This is the beginning of a more substantial correction down the road. This is wave one," he added, saying he expects the S&P to pull back to 1150 in the near term, or around January's peak level. "But we still expect a wave two during the late summer or early fall." Overseas, Hong Kong's Hang Seng lost 0.2% while Japan's Nikkei was closed for a holiday. The FTSE in London gave up 2.6%, and the DAX in Frankfurt also shed 2.6%. Late Monday, agents of the Federal Bureau of Investigation and detectives of the New York City Police Department arrested Faisal Shahzad in relation to the failed car bomb found in New York City's Times Square on May 1. Shahzad had been trying to get on a flight to Dubai when he was taken into custody.