Wall Street stocks fell on Tuesday, led lower by Nasdaq, as the euro zone's continuing debt crisis kept nervous investors on edge.

Trading was likely to be volatile, reflecting a market driven by sentiment, after equities around the world slid. Tuesday's decline came a day after shares posted their worst day in a month.

European officials for the first time refused to rule out default by Greece and investors feared the crisis could overtake the bigger European economies of Spain and Italy.

Helping support markets, traders cited rumors that the European Central Bank was buying peripheral bonds for the first time in three months, with Portugal the suspected target.

The markets are quite nervous at the moment and we still don't know what happens in euro debt world, said Frank Lesh, a futures analyst and broker at FuturePath Trading in Chicago.

Stocks of chipmakers fell sharply after Novellus Systems Inc said it expects bookings to continue to fall as chipmakers curb capacity. Novellus fell 7.8 percent to $33. The SOX semiconductor index <.SOX> fell 3 percent.

Economically sensitive areas, such as industrials and banking, were weak. Bank of America fell 0.9 percent to $10.25 while General Electric fell 0.5 percent to$18.54.

The Dow Jones industrial average <.DJI> gained 6.09 points, or 0.05 percent, to 12,511.85. The Standard & Poor's 500 Index <.SPX> dropped 0.33 point, or 0.03 percent, to 1,319.16. The Nasdaq Composite Index <.IXIC> dropped 13.93 points, or 0.50 percent, to 2,788.69.

The S&P 500 found support at its 50- and 100-day moving averages around 1,316 in the last session, a level that appeared to acting as support again on Tuesday.

The euro stumbled to an all-time low against the Swiss franc on Tuesday as euro zone government bond yields vaulted higher, prompting investors to dump the single currency for safer ones.

The U.S. corporate earnings season, which Alcoa Inc kicked off on Monday, is widely expected to be good and could provide some counterbalance to the troubles engulfing the euro zone.

Alcoa Inc shares, which rose 1 percent after Monday's closing bell and after posting a big jump in second-quarter profit, was down 0.6 percent to $15.81 on Tuesday.

(Reporting by Edward Krudy; Editing by Kenneth Barry)