U.S. stocks closed lower on Wednesday, dropping in a broad decline as the outcome of negotiations between Greece and its international creditors remained up in the air, prompting investors to drop riskier assets like equities.
Wall Street has lately taken its cue from the situation in Greece, which needs fresh funds to avoid defaulting on a $1.8 billion debt repayment to the IMF on June 30.
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Greek Prime Minister Alexis Tsipras recently announced tax and reforms proposals, which market participants took as a sign of progress. But creditors demanded sweeping changes to the proposals on Wednesday, adding fresh uncertainty to talks aimed at unlocking aid to avert a debt default next week.
"The optimism we had about getting close to a deal has faded. That doesn't mean we won't get one, but insiders seem less confident than they were a few days ago," said Phil Orlando, chief equity market strategist at Federated Investors in New York.
"If Greece defaults, the economic impact on the U.S. will be relatively minor, but the headline risk will be significant and could lead to a drop of 5 or even 10 percent" in the S&P 500.
The U.S. Commerce Department said gross domestic product fell at a 0.2 percent annual rate in the January-March quarter, instead of the 0.7 percent it estimated last month.
Investors have been keeping a keen eye on economic data to see if the U.S. economy has recovered from a slow start at the beginning of the year. The Federal Reserve has said it remains data-dependent and expects to raise rates when it sees a sustained rebound in the economy.
The Dow Jones industrial average <.DJI> fell 178 points, or 0.98 percent, to 17,966.07, the S&P 500 <.SPX> lost 15.62 points, or 0.74 percent, to 2,108.58 and the Nasdaq Composite <.IXIC> dropped 37.68 points, or 0.73 percent, to 5,122.41.
All of the 10 major S&P 500 sectors were lower, with the materials index <.SPLRCM> leading declines with a 1.3 percent drop.
Declining issues outnumbered advancing ones on the NYSE by 2,154 to 880, for a 2.45-to-1 ratio on the downside; on the Nasdaq, 1,987 issues fell and 784 advanced for a 2.53-to-1 ratio favoring decliners.
The S&P 500 posted 17 new 52-week highs and 4 new lows; the Nasdaq recorded 113 new highs and 27 new lows.
About 5.5 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 6.1 billion.
(By Ryan Vlastelica; Editing by Nick Zieminski)