Wall Street drops as China hits commodities, Greece crisis drags

By Tanya Agrawal

REUTERS - U.S. stocks fell more than 1 percent on Tuesday, with the S&P 500 index trading below a key technical mark, as concerns of a slowdown in China weighed on commodity prices and investors fretted over aid talks for Greece as it runs out of cash.

The declines pushed the S&P and the Dow Jones Industrial Average into negative territory for the year, while the Nasdaq fell to a two-month low a day ahead of the start of the earnings season in the United States.

A euro zone summit, starting at 12 p.m. ET (1600 GMT) in Brussels, will decide if Greek Prime Minister Alexis Tsipras' latest proposal is enough to keep the country in the euro zone.

The pressure to negotiate a deal is high as Greece is running out of cash and the European Central Bank has tightened funding ahead of a July 20 deadline for Athens to repay $3.9 billion of bonds to the ECB.

Adding to the negative tone, a continuous slide in Chinese stocks weighed on an already ravaged global commodity sector, with prices of copper, coal, natural gas and iron ore falling towards their 2015 lows.

"Investors are concerned about China because that is a long-term issue. A slowdown in that economy has a much bigger and longer lasting impact," said Michael Joyce, President of JoycePayne Partners.

"Even if Greece were to leave the euro, it will have little long-term effect on the market. Right now, it's just a lot of noise."

At 11:37 a.m. ET the Dow Jones industrial average was down 203.74 points, or 1.15 percent, at 17,479.84 and the Nasdaq Composite was down 86.12 points, or 1.73 percent, at 4,905.82.

The S&P 500 was down 23.26 points, or 1.12 percent, at 2,045.5, below its 200-day moving average.

Eight of the 10 major S&P 500 sectors were lower. The materials index index led the declines with a 1.8 percent fall, weighed down by a strong dollar and the slide in commodity prices.

The dollar index was up 0.86 percent at $97.12, its highest level in a month, and the rise in likely to weigh on sentiment on the eve of the earnings season.

A stronger dollar reduces income from overseas. Corporate profits are expected to have fallen 3 percent in the second quarter, according to Thomson Reuters data.

One bright spot on Tuesday was data that showed the U.S. trade deficit widened less than expected in May, suggesting economists might raise slightly their forecasts for economic growth in the quarter.

Advanced Micro Devices shares slumped 15 percent to $2.10 after the chipmaker cut its quarterly revenue forecast, citing weaker-than-expected PC demand.

Pinnacle Entertainment rose 6 percent to $39.72 after Gaming and Leisure Properties raised its offer for its real estate assets to about $5 billion, including debt.

Shake Shack fell 8.4 percent to $54.07 after Morgan Stanley cut its rating on the hamburger chain operator's stock to "underweight", according to theflyonthewall.com.

Declining issues outnumbered advancers on the NYSE by 2,212 to 767. On the Nasdaq, 2,202 issues fell and 410 advanced.

The S&P 500 index showed six new 52-week highs and 44 new lows, while the Nasdaq recorded 28 new highs and 134 new lows.

(Editing by Savio D'Souza)