Wall Street tumbles on European summit skepticism
NEW YORK (Reuters) - Stocks fell sharply on Monday, putting the S&P 500 near break-even for June so far, as investors saw little reason to be optimistic about a European Union summit this week.
Markets remain sensitive to European headlines as the region's spiraling debt crisis could wreak further havoc on a slowing global economy.
Financial and energy stocks were among the primary drags. U.S. crude futures lost 0.7 percent to remain near the eight-month low hit last week. News that Spain had requested help for its struggling banks pressured financial stocks.
The PHLX oil service sector index .OSX dropped 3.4 percent and the KBW bank index .BKX slumped 2.7 percent.
Expectations for the two-day summit, which starts on Thursday, are low after Germany resisted pressure for common euro zone bonds or a flexible use of Europe's rescue funds at a meeting of the region's four biggest economies last week.
"Last week we were very hopeful that they were moving forward and the meetings this week would have a positive ending. Today there is a lot of doubt the EU summit will generate anything substantial," said Gail Dudack, chief investment strategist for Dudack Research Group in New York.
Austerity measures pushed forward by Germany have Greece mired in a long recession. Investors worry Spain could be the next domino to fall as Madrid's borrowing costs remain stubbornly high.
Among individual stocks, Chesapeake (CHK.N) fell 8.5 percent to $17.03 as the worst performer on the benchmark S&P 500 index. Reuters reported that under the direction of Chief Executive Aubrey McClendon, the company plotted with its top competitor to suppress land prices in one of America's most promising oil and gas locations.
The Dow Jones industrial average .DJI dropped 137.97 points, or 1.09 percent, to 12,502.81. The Standard & Poor's 500 Index .SPX lost 21.30 points, or 1.60 percent, to 1,313.72. The Nasdaq Composite Index .IXIC declined 56.26 points, or 1.95 percent, to 2,836.16.
For the month, the Dow is up 0.88 percent while the S&P 500 is up 0.26 percent. The Nasdaq is up 0.31 percent.
Spain formally requested euro zone rescue loans for up to 100 billion euros ($125 billion) to recapitalize its banks, saying the final amount of assistance would be set at a later stage. Some market economists say it is merely a prelude to a full bailout for Spain.
Spanish government bonds came under pressure with the 10-year bond yield up almost 30 basis points at 6.64 percent, near the 7-percent mark that forced other indebted European countries to ask for bailouts. <GVD/EUR>
A European equity benchmark .FTEU3 fell 1.6 percent and the dollar, seen as a safe-haven when European markets are volatile, rose as worries about global growth lingered after last week's soft data on manufacturing worldwide. .EU<USD/>
New U.S. single-family home sales surged in May to a seasonally adjusted 369,000-unit annual rate, the highest since April 2010, and prices rose from a year ago amid tightening supply. But the European concerns outweighed any signs of life in the long-struggling industry as a homebuilding index .HGX fell 1.6 percent.
Wal-Mart Stores Inc (WMT.N) was the lone advancer on the Dow. Walmart Canada said the company is opening of 47 hiring centers across Canada to support its growth plans. The stock rose 1.3 percent to $68.18.
Volume was light with about 5.84 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, well below the daily average of 6.85 billion.
Declining stocks outnumbered advancing ones on the NYSE by 2,319 to 686, while on the Nasdaq, decliners beat advancers 1,868 to 649.
(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)