The S&P 500 closed under 1,100 for the first time since September 2010 as eurozone ministers failed to reach a decision on the second phase of a bailout for Greece.
Ministers have not yet approved the release of next tranche of bailout cash, totalling €8bn and scheduled for release in mid-October, over concerns Greece has not acted sufficiently to balance its books.
A final meeting will take place on 13 October in which leaders will attempt to thrash out a deal.
The indecision resulted in investors offloading banks, as fears intensify of a lender failing as Greece's financial crisis deepens.
The S&P 500 declined 2.9% or 32 points to 1,099, while the Dow Jones fared no better, down 2.36% or 258 points to 10,655.
US financial stocks fell 4.5% yesterday, taking total losses so far this year to 29%.
However, the US dollar continued to strengthen as investors become increasing less risk averse, up 0.19% against the pound to $1.55.
Meanwhile, in Asia the Nikkei slipped 1.05% to 8,456.
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