NEW YORK ( TheStreet) -- Greece's debt woes continued to drag markets into the red on Monday, with the latest news being Standard & Poor's downgrade of Greece's credit rating and the agency's peg of the odds of a Greek exit from the eurozone at 50%.

The S&P 500 declined 1.57%, the Dow Jones Industrial Average fell 1.48%, or 266 points, and the Nasdaq slid 1.85%. The Dow is now trading in negative territory for the year; at one point Monday it was down more than 300 points. The S&P 500 was trading barely positive year to date.

While talks broke down over the weekend between Greece and its creditors, German Chancellor Angela Merkel and French President Francois Hollande said they're willing to continue negotiations with the debt-laden nation, even after its July 5 referendum that will allow citizens to decide if Greece should exit the eurozone is completed, according to Bloomberg. Greece has a payment due to the International Monetary Fund on Tuesday. It was announced that banks in Greece would remain closed until July 6 with ATM withdrawal limits of 60 euros a day. One Greek official, however, told CNBC that banks are set to open on Thursday.

"In our view, the Greek government's decision to hold a national referendum on official creditors' loan proposals indicates that Prime Minister Alexis Tsipras will prioritize domestic politics over the country's financial and economic stability, commercial debt service, and membership of the eurozone," Standard & Poor's said. 

Standard & Poor's lowered Greece's long-term credit rating to "CCC minus" from "CCC."

The CBOE Volatility Index (VIX.X) surged 33%, the biggest jump in a session this year.  Yields on the benchmark 10-Year Treasury dipped, reaching 2.33%, while gold prices rose 0.51% to $1,179.20 an ounce, as investors rushed into safer assets.

"Timing will almost certainly push beyond that [June 30] date with Greece calling for a referendum on July 5," wrote Bill Stone, chief investment strategist at PNC Financial Services Group. "PNC still expects an agreement to eventually be reached, but believes the eurozone's economy and financial system are strong enough to withstand a Greek default or exit."

Greek stocks that trade in the U.S., such as the National Bank of Greece (NBG), fell 25%, while shipper Seanergy Maritime Holdings (SHIP) slipped 7.3%.

Despite the drama in Greece, the euro showed signs of life, gaining 0.81% against the dollar, after declining some 0.4% earlier in the session, as investors view the selloff as a buying opportunity.  European stocks told a different story, as London's FTSE 100 ended the volatile session to the downside by 1.97%. European banks including Deutsche Bank (DB) and BNP Paribas (BNPQY) traded lower by some 5%.

"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."

Stocks in China entered bear market territory, with the Shanghai Composite down 3.34% on Monday 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%.

In the U.S., banks were hit the hardest. JPMorgan Chase (JPM) shares moved lower by 2.3%, while shares of Citigroup (C) fell 2.4% and Bank of America (BAC) slipped 2.8%.

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