Spain bailout rally brief as Wall Street slides

NEW YORK: Stocks fell on Monday as Europe's aid package for Spanish
banks did little to alleviate investor concerns about the euro zone's
finances and a slowdown in the wider global economy.
The equity
market bounced in early trading, but the rally was quickly snuffed out
by sellers and a sharp decline accelerated into the market's close.
Spanish
bond yields rose as a bailout of up to $125 billion for the country's
struggling banks failed to quell concerns that Madrid may be locked out
of funding markets and forced to seek external help.
"They're borrowing more money, not doing anything about growth," Paul Zemsky,
head of asset allocation at ING Investment Management in New York,
said. "Today we're not worried about Spain's banking system falling off
a cliff, but other than that, nothing has changed."
The New York-traded stock of Spanish lender Banco Santander
fell 3.1 percent to $5.92. Weakness in Europe's financial sector was
mirrored in the United States where the S&P financial index
<.GSPF> fell 1.9 percent and was the weakest performing sector.
Shares of Morgan Stanley ,
which has recently been a barometer of concerns about Europe due to
perceptions of the investment bank's exposure to the region, fell 2.5
percent to $13.37.
Spain's 10-year bond yields ended
higher at 6.5 percent as an early rally in prices quickly evaporated.
Some investors were concerned the new debt would put existing
bondholders lower in the capital structure, which increases the risk
for those holders.
"This is a realization that Spain, while
providing money for its banks, is going to add to its debt-to-GDP
ratio, and it's going to potentially subordinate some of the current
Spanish sovereign debt, which doesn't make those bondholders happy,"
said Zemsky.
The Dow Jones industrial average <.DJI> dropped 142.97 points, or 1.14 percent, to 12,411.23. The Standard & Poor's
500 Index <.SPX> fell 16.73 points, or 1.26 percent, to 1,308.93.
The Nasdaq Composite Index <.IXIC> lost 48.69 points, or 1.70
percent, to 2,809.73.
Investors fear a crisis in Spain would
compound the currency bloc's troubles as June 17 elections loom in
Greece, which many think could lead to Greece's exit from the euro zone.
The
worries come at a time when economies the world over are showing signs
of slowing. China's inflation, industrial output and retail sales all
flagged in May. It was the second straight month of sluggish growth.
Trading
volume was light on the NYSE, Nasdaq and AMEX with 6 billion shares
traded, about 14 percent below its 10-day moving average. About four
shares fell for every one that rose on NYSE.
U.S. companies are
finding it more difficult to increase revenue now than at just about
any time since the financial crisis. Firms that make up the S&P 500
are expected to boost sales by just 2.2 percent in the current quarter,
according to Thomson Reuters data.
AK Steel Holding Corp tumbled 14 percent to $4.99 after two brokerages cut their ratings on the small cap, including a "sell" rating from Goldman Sachs, which cited a highly leveraged balance sheet and weak steel prices.
U.S.
steelmakers are struggling with weak demand, rising costs and narrowing
margins. Production capacity has yet to fully recover from the most
recent recession.
Shares in US Steel Corp fell 6.5 percent to $17.89.
Apple Inc
took the wraps off its own mobile mapping service and made its enhanced
Siri voice-search available for iPads as it rolled out souped-up
software and hardware on Monday to help it wage war on Google Inc .
But Apple's shares fell 1.6 percent to $571.17 after the announcement at the company's developers conference on Monday. Google's shares fell 2.1 percent to $568.50.
Goldman Sachs is close to striking a deal over the sale of its hedge fund administration business with State Street Corp ,
the Financial Times reported. The move would create the largest
administration services provider to hedge funds worldwide. Goldman's
stock fell 1.8 percent to $92.80. State Street added 1.5 percent to
$42.79. - Reuters