U.S. stocks gave up most of the gains on Tuesday after former Greek prime minister told media that the country is considering exiting the euro zone, triggering a last-minute sell-off.

When the market closed, the Dow Jones industrial average dipped 1.82 points, or 0.01 percent, at 12,502.66. The Standard & Poor's 500 edged up 0.64 points, or 0.05 percent, to 1,316.63. The Nasdaq Composite Index fell 8.13 points, or 0.29 percent, to 2,839.08.

The sell-off came after Lucas Papademos, former Greek prime minister, said in an interview that preparations for Greece's exit from the euro zone are being considered and warned that dropping the single currency would have "catastrophic" economic consequences for the debt-ridden nation and the rest of the euro zone.

Stocks nose-dived right after the news and only managed to recover a little bit after the shock and closed around the break- even line.

Prior to the surprising reversal, major indexes had been on track for their second straight gains on the hope that the upcoming informal meeting of European leaders could end up with something productive, despite a German official saying the dinner would not be a decision-making summit.

Meanwhile, the banking deposits of Greece have somewhat stabilized, easing some concerns about the region's banking industry.

Also boosting sentiment in the earlier session, the National Association of Realtors said Tuesday that Americans bought more previously owned houses in April while the median price surged 10 percent over the past year.

However, concerns about the European economy still kept a lid on the market.

The Organization for Economic Cooperation and Development (OECD) warned on Tuesday that the 17 nations using the euro are at risk of falling into a "severe recession."

The OECD called on the European Central Bank to do more to stem the crisis by putting the focus on growth issues as austerity policies implemented across the region have weighed on growth.

The high level of government debt in many European countries does warrant a push to reduce spending, but that process should occur gradually and over the long term, according to the OECD's report.

Among stocks in focus, Facebook suffered another severe loss on its third day of trading, plummeting about 9 percent to settle at 31.00 dollars per share, more than 18 percent than its issuing price of 38 dollars.