All three major averages had been sharply lower for most of the session amid jitters over a possible Greek exit from the euro zone and ahead of an informal EU summit in Brussels. Even some European officials said euro zone countries will have to prepare a contingency plan if Greece eventually leaves.

“This is a market that’s nervous over the deteriorating situation in Greece and Europe and waiting for a policy response that can assuage fears,” said Quincy Krosby, market strategist at Prudential Financial.

The euro fell below $1.26, hitting its lowest against the dollar since July 2010. European stocks fell sharply , reversing a two-session recovery rally. The German 30-year bund yield tumbled below 2 percent for the first time ever.

And oil prices slumped to seven-month lows with U.S. light, sweet crude settling below $90 a barrel.

Investors were rattled in the previous session after Greece's former Prime Minister Lucas Papademos said the risk of Greece leaving the euro is real , and that an exit would have "catastrophic" economic consequences for Greece and the rest of the euro zone. However, he later clarified to CNBC that no exit preparations were underway .

TOL News & Analysis

 Record High New Home Prices Have Room to Grow - 23 May 2013 EDT - CNBC.COM

 US STOCKS-Wall St falters in volatile session on Fed worries - 22 May 2013 EDT

 Stocks Tumble Nearly 1% on Fed Tapering Fears - 22 May 2013 EDT - CNBC.COM

 US STOCKS-Wall St declines as FOMC minutes raise concern over Fed tapering - 22 May 2013 EDT

 Home Depot rises on housing data, Lowe's results - 22 May 2013 EDT

 More TOL News