NEW YORK (AP) — Stocks are having their worst day this year Friday after Greece hit a roadblock on its way to a critical international bailout.

The Dow Jones industrial average was down 126 points, or 1 percent, at 12,765 at 3 p.m. EST. Materials stocks fell the most. Aluminum producer Alcoa Inc. fell 3.4 percent, the biggest drop among the 30 stocks in the index.

Just a day earlier, investors had been buying stocks on news that Greek Prime Minister Lucas Papademos and the heads of the three parties backing his government had agreed to wage cuts, civil service layoffs and cuts in government spending.

But finance ministers from the other 16 countries that use the euro insisted that Greece save an extra €325 million ($430 million), pass the cuts through parliament and guarantee that they will be enforced after planned elections in April.

Greece needs another round of international bailout money, its second, to avoid missing a bond payment next month and defaulting, an event that could cause a shock in world financial markets.

By Friday, four Greek cabinet ministers had resigned over the wage cuts and spending reductions, known as austerity measures.

"The economy in Greece is deteriorating faster than anticipated, and the austerity measures aren't particularly popular," said Mark Luschini, chief investment analyst at Janney Montgomery Scott. "There could be a disorderly default."

The decline in U.S. stocks was broad. All 10 industry categories in the S&P 500 were down. Industrial, energy and financial stocks each fell more than 1 percent.

Since the start of the year, stocks have been generally rising on small daily gains because of good economic news and a sense that the worst of the debt crisis in Europe may be over. The Dow has risen 4.5 percent in 2012 and seemed poised earlier this week to break 13,000 for the first time since 2008.

At its low point for the day, the Dow was down 145 points. Its largest intraday loss so far this year was 159 points, on Jan. 13, but the Dow has not closed down more than 100 points since Dec. 28.

In other trading, the broader Standard & Poor's 500 was down 11 points to 1,341. The Nasdaq composite fell 23 points to 2,905.

The benchmark stock index in Athens fell 3.2 percent. Germany's DAX was down 1.4 percent. The CAC-40 in France was down 1.5 percent.

The euro, which had risen Thursday to its highest level against the dollar in two months, fell by a penny and was trading at just under $1.32. U.S. Treasury yields fell, a sign that investors were buying bonds as a safer investment than stocks.

The price of gold fell $16, or nearly 1 percent, to settle at $1,725 an ounce.

Gold usually rises when stocks fall because it's seen as a safe place to park money when markets are volatile, but that relationship has broken down recently. Many investors now worry that gold is too expensive after a 26 percent surge over the past year.

"People are speculating, and so the drop could get bigger," said Mark Matson, CEO of Matson Money, which manages more $3 billion in assets. "Gold is good for jewelry, not in your portfolio."

In other commodity news, the price of oil fell $1.17 to $98.67 a barrel.

Among stocks making big moves:

— LinkedIn rose 17 percent. The online networking company announced that fourth quarter earnings had soared and revenue doubled.

— Jeans maker True Religion Apparel plunged 28 percent. The company reported earnings that were far below what analysts were expecting. Analysts slashed their ratings on the stock, citing weak sales and big markdowns.

— Telecom gear maker Alcatel-Lucent rose 12 percent after announcing it made its first annual profit in 2011 after years of losses.

— First Solar, the solar panel maker, fell 10 percent. The company said a construction delay is threatening to undo the sale of a large solar project to power producer Exelon Corp.