U.S. stocks declined on Wednesday as concerns over European debt crisis continued to weigh on the market.

When the market closed, the Dow Jones industrial average lost 160.83 points, or 1.28 percent, to 12,419.86. The Standard & Poor' s 500 was down 19.10 points, or 1.43 percent, to 1,313.32. The Nasdaq Composite Index retreated 33.63 points, or 1.17 percent, to 2,837.36.

Intel was the only one managing to end in positive territory among 30 Dow components while all of the 10 S&P 500 big cap sectors closed lower on Wednesday.

Energy stocks suffered the most as oil prices tumbled to a seven-month low amid demand concerns.

Light, sweet crude for July delivery dropped 2.94 dollars, or 3. 24 percent to settle at 87.82 dollars a barrel on the New York Mercantile Exchange, on track for its biggest decline since December 2008.

After a one-day reprieve, European woes continued to dominate the U.S. equity market. Spain's borrowing costs soared to their highest level of the euro era on Wednesday, underlining fears about the country's fragile banking system and broader economy.

There's also news that the European Central Bank rejected a plan to recapitalize Spain's fourth-largest bank, Bankia, adding to rising concerns that Spain would be the next country in the euro zone to trigger a debt crisis.

Meanwhile, yields of Italian 10-year government bonds topped 6 percent for the first time since January on growing concerns about the country' s solvency ability.

To prevent the current crisis from spreading, the European Commission said the euro zone must move towards a banking union, issuing Eurobonds while cutting debt. However, investors doubt whether the plan can be realized given the objection from some major countries like Germany.

Economic news from America failed to please investors either. According to a report released by the National Association of Realtors, contracts to purchase previously owned U.S. homes unexpectedly fell in April to a four-month low, undermining some of the recent optimism that the housing sector was touching bottom.

In the previous session, reports showed the U.S. consumer confidence declined to a four-month low in May and home prices dropped to new post crisis lows.

"It seems that the consumers are worried about higher food and gas prices, continued high unemployment, falling home values," said Kenneth Polcari, managing director of ICAP Equities.