Stocks suffered their biggest losses in three months Tuesday, the first hiccup in a strong and steady rally to start the year. Wall Street worried about the global economy and waited while Greece pressured the last investors to sign on for its bailout.
The Dow Jones industrial average fell more than 200 points, giving up more than a quarter of its 745-point advance since Jan. 1, the best start to a year in the U.S. market since 1998.
The sell-off, which spread west from Europe, also interrupted a period of unusual calm on Wall Street. Before Tuesday, the Dow had not fallen 100 points for 45 straight trading sessions, the longest streak since 2006.
The decline of 203.66 points was the worst for the Dow since Nov. 23 and left the average at 12,759.15. It was only last week that the Dow closed above 13,000 for the first time since May 2008, four months before the worst of the financial crisis.
"When things go straight up and don't ever correct or have some sort of normal pullback, as an investor, that makes me nervous," said Ed Hyland, a global investment specialist with J.P. Morgan Private Bank.
The gradual rally had been powered by optimism about the U.S. economic recovery. But investors realized that Greece's debt problems, Europe's economic problems and Israel's Iran problems were still very much their problems, too.
Stocks fell sharply from the opening bell and never mounted a serious comeback. The Dow was down as much as 227 points. All but one of the 30 stocks in the average finished the day lower. Intel managed a gain of 7 cents.
All 10 industry groups in the Standard & Poor's 500 declined. Bank stocks, which typically take a hit when there is any reason to worry about Greece, led the declines, followed by industrial and materials companies, which depend on strength in the world economy.
Alcoa, which makes aluminum and depends heavily on world economic demand, fell 4.1 percent, the worst of the Dow 30. China revised its projection for economic growth on Monday to 7.5 percent this year, down from 8 percent.
The Standard & Poor's 500 index fell 20.97 points, its worst decline since Dec. 8, to 1,343.36. The S&P had not declined 1 percent or more for 45 straight trading days, also the longest streak since 2006. That year, the S&P put together 94 in a row.
The Nasdaq composite index dropped 40.16 points to 2,910.32. The Nasdaq last week broke through 3,000 for the first time since December 2000, during the collapse in dot-com stocks.
Last year, sell-offs like this were much more common. The S&P fell by at least 1 percent on 48 trading days, roughly one in every five. During the depths of the financial crisis in the last four months of 2008, it happened roughly one in every three days.
Stocks fell more than 3 percent Tuesday in Germany, Spain and France, and 1.9 percent in Britain. Greece stepped up pressure on private investors to swap their Greek government bonds for replacements with a lower face value and interest rate.
Major banks and investment funds have signed on for the swap, but it remains unclear whether hedge funds, which had already bought the bonds at a steep discount and may profit from bond insurance payouts if Greece defaults, will agree. The deadline is Thursday.
The swap is vital for Greece to cut its debt and get a bailout of €130 billion, or $172 billion, from other countries and the International Monetary Fund. Without the bailout, Greece could default on its debt later this month and rattle markets around the world.
Bill Stone, chief investment strategist for PNC Wealth Management, called Tuesday's decline "fairly rational," considering how much the market has climbed and the economic worries in Greece and the rest of Europe.
"You need the pullback to give people opportunities to want to get involved again," Stone said.
The price of oil slipped $2.02 to $104.70 per barrel on the New York Mercantile Exchange. New York crude has risen from $96 last month amid fears of a disruption in global oil supplies driven by the potential for military conflict with Iran.
President Barack Obama said diplomacy can still resolve the crisis over Iran's possible pursuit of nuclear weapons and accused his Republican critics of "beating the drums of war." Iran dominated Obama's first news conference of the year.
The price of gold fell $31.80 per ounce, or 2.1 percent, to $1,672.10 per ounce. Silver, platinum and copper all fell more than 2 percent because of concerns about Europe and weaker economic demand in China.
"Global growth fears now are hitting home, and we're seeing selling across the board," said Matt Zeman, a market analyst for Kingsview Financial.
Yields on U.S. government debt also fell as investors moved their money into what they perceive to be a safer asset. The yield on the benchmark 10-year Treasury note fell to 1.96 percent from 2.01 percent late Monday. Bond yields fall when their prices rise.
Among stocks making big moves:
— Weight loss company Nutrisystem Inc. fell 10.9 percent after it reported a bigger-than-expected fourth-quarter loss and a disappointing outlook.
— General Motors fell 5.5 percent after saying it will pay €304 million, or $402 million, for a 7 percent stake in Peugeot, which will make it the French carmaker's second-largest shareholder after the Peugeot family.
— VeriFone Systems Inc. rose 7.9 percent after the maker of electronic payment systems predicted a bigger-than-expected 2012 profit.
— Apple fell 0.5 percent one day before the expected release of its iPad 3 tablet computer.
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AP Business Writer Sandy Shore contributed to this story.