Greek Debt Deal Holding Stocks Hostage

As a pending Greek debt deal hangs in the balance, U.S. stocks are falling.

S&P 500 stocks are down close to 1% this morning as Euro-zone finance ministers are holding off on approving a second Greek bailout until Greece’s parliament can agree on new austerity measures. With anti-austerity riots raging in the streets of Athens for two straight days, it might be a few days before the new Greek debt deal is in place. The proposed cuts won’t go before parliament until sometime next week.

While the deal is in limbo, uncertainty has returned to the market. Frankly, the only surprise is that it took this long. The sovereign debt fiasco in Greece and the rest of the Euro-zone drove the market in 2011, sending stocks seesawing up and down almost daily depending on whether the news was good or bad.

But in the first month-plus of 2012, volatility has been eerily absent. The sovereign debt problems in Europe haven’t subsided, but U.S. investors seemed to finally be tuning them out.

Stocks have been on an improbable rise in 2012. The S&P is up 7.4% this year. The Dow Jones Industrial Average closed at its highest level since May 2008 yesterday.

The Wall Street Journal’s Steven Russolillo summed it up best this morning, “Considering stocks have moved nearly straight up throughout the first six weeks of 2012, there was a glimmer of hope that Greece’s debt woes were finally on the verge of being priced into the broader market.”

But Greece’s problems are rearing their ugly head again today. Hopefully this time Greece's problems won't become the market's problems for an entire year.