S&P suffers year's biggest loss as Greek deal falters

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Greek Finance Minister Evangelos Venizelos said the nation needs to reach a decision within days on accepting the terms of a bailout.

"Investors are trying to determine how disruptive this could end up being, and if you want to be invested in a group like financials, you need to be very careful in your positioning," said Duncan Richardson, chief equity investment officer at Eaton Vance in Boston. "There's still a lot of concern out there, and that gets amplified by any setback like this."

Shares of Bank of America Corp fell 1.3 percent to $8.07 while manufacturer Caterpillar lost 1 percent to $111.75. Alcoa Inc slid 3.3 percent to $10.29.

The Dow Jones industrial average <.DJI> was down 89.23 points, or 0.69 percent, at 12,801.23. The Standard & Poor's 500 Index <.SPX> was down 9.31 points, or 0.69 percent, at 1,342.64. The Nasdaq Composite Index <.IXIC> was down 23.35 points, or 0.80 percent, at 2,903.88.

Some analysts said they saw Friday's decline as just a pause in an overall higher trend. Even with the day's decline, the benchmark S&P 500 index is up 6.8 percent since the start of the year and remains at seven-month highs.

"There are plenty of reasons the market would want to take a pause here," Richardson said. "A 20 percent rise since October is reason to be cautious, especially since volatility has fallen so much since then."

For the week, the S&P fell 0.2 percent and Friday's losses snapped a three-day string of gains. The Dow fell 0.5 percent for the week while the Nasdaq fell less than 0.1 percent.

U.S. consumer sentiment data also weighed on the market. The Thomson Reuters/University of Michigan overall index of consumer sentiment fell to 72.5 in early February from January's 75.0, which was the highest level since February 2011.

Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston, said 80 percent of New York Stock Exchange stocks were trading above their 200-day moving average, a sign of overbought conditions.