The Dow fell 297.05 points, or 2.5 percent, to close at 11,657.96. It was the biggest one-day point drop for the Dow since a 303 point fall on Sept. 9.
The S&P 500 lost 35.02, or 2.8 percent, to 1,218.28. Some analysts took comfort that the S&P closed above 1,215. A drop below that level would erase nearly all of the market's gains in October. The Nasdaq composite dropped 77.45, or 2.9 percent, to 2,606.96.
Pfizer Inc. was the only company in the Dow stock to rise. It gained 0.4 percent after its income and revenue beat Wall Street's estimates. General Motors Co. sank 9.8 percent after its October sales came in lower than Wall Street analysts were expecting.
Financial companies in the S&P 500 dropped 4.7 percent, the biggest loss among the 10 company groups that make up the index.
Bank of America Corp lost 6.3 percent. JP Morgan Chase & Co. dropped 5.9 percent, and Citigroup shed 7.7 percent.
In the United States, the market sank Monday before the surprise Greek announcement. MF Global Holdings, a securities firm led by former New Jersey Gov. Jon Corzine, was driven into bankruptcy in part because of its holdings of European debt. The selling accelerated after the Greek announcement, and the U.S. market opened with a drop of almost 300 points.
Some of the selling in stocks came because investors were eager to lock in profits after an almost uninterrupted rally in October that was largely due to higher confidence in Europe's latest financial rescue plan for Greece. The Dow had its best month in nine years, and the Standard & Poor's 500 index its best in 20 years.
In the bond market, the yield on the 10-year Treasury note sank to 1.96 percent from 2.16 percent late Monday, a steep drop. Bond yields fall when their prices rise as investors buy assets that are considered to better hold their value during a slowing economy. The dollar rose to $1.36 for every euro.
The yield on the 30-year Treasury bond sank from 3.38 percent Friday to 2.96 percent Tuesday.
“That's the biggest change that I've seen in my career,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott. “It's obscene.”