US STOCKS-U.S. stocks lower amid Greek debt worries

* Fed meeting in focus this week

* Dow lower for the year

* Cigna (NYSE: CI - news) touches record high after Anthem (NYSE: ANTM - news) takeover offer report

* Indexes down: Dow 0.7 pct, S&P 0.5 pct, Nasdaq 0.6 pct (Updates to early afternoon)

By Tanya Agrawal

June 15 (Reuters) - U.S. stocks recouped some of their losses in afternoon trading on Monday after a sharp fall on worries about Greece's debt, but the Dow Jones Industrial Average remained in negative territory for the year.

Talks between Greece and its creditors broke up after less than an hour on Sunday, raising the prospect of Athens being unable to repay $1.8 billion owed to the International Monetary Fund by the end of this month.

"The market has had a long time to prepare for (a Greek default) and has done what it can with what it sees on the horizon but with situations like this, there is always an unknown factor," said Ashwin Bulchandani, head strategist at asset manager MatlinPatterson in New York.

"Uncertainty freaks the market out. It makes it very, very nervous."

Investors were also nervous ahead of the Federal Reserve's two-day policy meeting starting Tuesday. Upbeat consumer sentiment and other data last week added to views the economy is regaining momentum and could encourage the Fed to raise interest raise as soon as September.

Investors will focus on any changes in Fed Chair Janet Yellen's language in a post-meeting news conference.

Easy monetary policy has driven borrowing costs lower and helped stocks and bond prices to record highs in recent years.

The last time U.S. stocks saw a 10 percent correction was in May 2011, according to RBC Capital Markets.

At 12:41 p.m. ET (1641 GMT) the Dow Jones industrial average was down 117.41 points, or 0.66 percent, at 17,781.43, the S&P 500 was down 9.98 points, or 0.48 percent, at 2,084.13 and the Nasdaq Composite was down 28.77 points, or 0.57 percent, at 5,022.33.

All of the 10 major S&P 500 sectors were lower, with the technology index leading the decline with a 0.79 percent drop.

Microsoft (NasdaqGS: MSFT - news) 's 1.5 percent fall weighed the most on the Nasdaq and the S&P while United Technologies' 2.2 percent drop was the biggest drag on the Dow.

Data on Monday showed that manufacturing activity in New (KOSDAQ: 160550.KQ - news) York State slowed in June, while U.S. industrial production unexpectedly fell in May, mainly because of a strong dollar and a drop in spending by energy companies.

However, U.S. homebuilder sentiment rose more than expected in June, hitting its highest level since September.

Cigna shares soared 19.4 percent to a record high of $164 after the Wall Street Journal reported that the health insurer had rebuffed a takeover offer from Anthem. Anthem was up 2.2 percent at $164.25.

United Technologies shares fell 2.2 percent to $114.94 after the company said it was exiting the helicopter business.

Dealertrack Technologies (NasdaqGS: TRAK - news) soared 57.4 percent to $62.72 after Cox Automotive agreed to buy the company in a deal valued at $4 billion.

Declining issues outnumbered advancers on the NYSE by 1,954 to 1,010. On the Nasdaq, 1,611 issues fell and 1,113 rose.

Three stocks on the S&P 500 index hit a 52-week high while 11 hit 52-week low. The Nasdaq recorded 67 new highs and 46 new lows. (Reporting by Tanya Agrawal; Editing by Don Sebastian)