US STOCKS-Spain bailout rally brief as Wall St slides

Mon Jun 11, 2012 4:37pm EDT

* Investors concerned about terms of aid deal for Spain
    * Worries persist over Greek elections
    * Wall St coming off S&P's best week of 2012
    * Indexes off: Dow 1.1 pct, S&P 1.3 pct, Nasdaq 1.7 pct

    By Edward Krudy
    NEW YORK, June 11 (Reuters) - U.S. 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
 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
    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 dropped 142.97
points, or 1.14 percent, to 12,411.23. The Standard & Poor's 500
Index fell 16.73 points, or 1.26 percent, to 1,308.93.
The Nasdaq Composite Index 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.

Original Article