US STOCKS-S&P enters bear market as Greece aid delayed

* S&P 500 in bear market, down 20 pct from 2011 high

* Goldman cuts 2012 GDP view to 1.3 pct

* Strength in technology limits Nasdaq losses

* Indexes: Dow off 1.4 pct, S&P off 0.8 pct, Nasdaq up 0.6 (Adds quote, updates prices)

By Ryan Vlastelica

NEW YORK, Oct 4 (Reuters) - U.S. stocks tumbled on Tuesday with the S&P 500 sliding into bear market territory as European officials delayed a vital aid payment to debt-stricken Greece but the government said it was not preparing for a default.

The benchmark S&P has dropped more than 20 percent from an intraday high in early May. Fears over deepening problems in Europe's financial system have contributed to equity losses and increased volatility in the past several months.

Analysts worried that stocks were headed for an extended period of poor performance. Volume has generally been stronger on days when stocks decline, a sign that buyers were hesitant to invest.

"There's indiscriminate selling at this point, without any real justification. No one really understands what's going on in Europe, and until we get more clarity I doubt if we'll see much interest in buying," said Eric Green, senior portfolio manager and director of research at Philadelphia-based Penn Capital Management, which oversees $6.5 billion.

The Dow Jones industrial average .DJI was down 151.89 points, or 1.43 percent, at 10,503.41. The Standard & Poor's 500 Index .SPX was down 9.05 points, or 0.82 percent, at 1,090.18. The Nasdaq Composite Index .IXIC was up 4.11 points, or 0.18 percent, at 2,339.94.

U.S. banks continued to be pressured by Europe's problems. Morgan Stanley (MS.N) was down nearly 4 percent in early trading before easing to $12.42, off 0.4 percent. the stock is off about 56 percent this year.

The financial sector has been among the hardest hit in recent months, with the KBW Bank Index .BKX falling 36 percent since April 29 due to fears of exposure to European debt. The index dropped 0.7 percent on Tuesday.

Officials postponed an aid payment to Greece and considered making banks take bigger losses on Greek debt. For details, see [ID:nL5E7L419D]

Wall Street's losses extended the previous day's decline to 13-month lows as investors feared the crisis in Europe could throw the United States into a new recession.

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To see a graphic on the bear market, see:

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Adding to market pessimism, Goldman Sachs cut its gross domestic product outlook for advanced economies for 2012, lowering its growth forecast to 1.3 percent from 2.1 percent.

"The main driver of our shift in views has been the escalation of bank funding stress in the Euro area, alongside deeper public budget cuts in a number of European countries," Goldman said in a note.

Nine of 10 S&P sectors were down, but gains in some large-cap technology stocks limited sector declines and capped Nasdaq losses. F5 Networks Inc (FFIV.O) rose 7.2 percent to $75.58 while Yahoo Inc (YHOO.O) was up 4.7 percent on $14.16.

U.S. Federal Reserve Chairman Ben Bernanke told the Joint Economic Committee of Congress that the Fed was prepared to take more steps to help a fragile recovery held back by a weak job market and financial stresses in Europe. (Editing by Jeffrey Benkoe)