NEW YORK Stocks fell for a second straight session on Monday, as Spain appeared closer to needing a national bailout and poor corporate results weighed on the market.
Weak results from McDonald's Corp (MCD.N) added to the cautious tone on Wall Street. Materials stocks were among the day's weakest, hurt by across-the-board declines in commodity prices.
Still, stocks ended well off the day's lows, rebounding from their initial plunge. Stocks appeared to stabilize as the S&P 500 approached its 50-day moving average of 1,332.98, a technical support level that could trigger more losses if convincingly broken.
Overall, three stocks fell for every one that rose on the New York Stock Exchange on Monday, a signal that the afternoon rebound was concentrated among larger-cap shares. On the Nasdaq, about four stocks fell for every one that rose.
"The sell-off this morning was overdone, and obviously, the market felt that way, too," said Eric Green, senior portfolio manager and director of research at Penn Capital Management in Philadelphia, which oversees $6.5 billion.
"Nothing incrementally negative came out, but obviously, we're still worried about the situation there."
The Spanish region of Murcia looked set to follow Valencia in tapping a government program to keep its finances afloat. Local media reported half a dozen regions were ready to follow suit.
Valencia's move contributed to a 1 percent drop in the S&P 500 on Friday. The benchmark index had appeared on track to exceed those losses on Monday, falling as much as 1.8 percent before recovering some of those losses.
The International Monetary Fund dismissed a weekend news report in German weekly Der Spiegel that it may refuse to continue supporting Greece as it prepares for talks with the new Greek government on its international bailout.
McDonald's Corp (MCD.N) was the latest earnings casualty among large multinational companies after posting a lower-than-expected profit, citing a slower global economy and a stronger dollar. McDonald's stock slid 2.9 percent to $88.94. It was the biggest drag on the Dow. Shares of Wendy's Co (WEN.O) fell 2.4 percent to $4.51.
After the closing bell, Texas Instruments Inc (TXN.O) shares dropped 1.4 percent to $26.44 in extended trading following the company's results. Texas Instruments reported a drop in its second-quarter profit and sales.
With 23 percent of S&P 500 companies having reported results, 67.5 percent have posted earnings above expectations, although many analysts have cut their forecasts in recent weeks, allowing for easier beats. Over the past four quarters, 68 percent of companies beat estimates.
The high-profile earnings disappointments have taken a toll on third-quarter estimates. Third-quarter S&P 500 earnings growth is now expected to come in at 0.9 percent, down from 3.1 percent at the beginning of the month.
The Dow Jones industrial average .DJI fell 101.11 points, or 0.79 percent, to close at 12,721.46. The Standard & Poor's 500 Index .SPX declined 12.14 points, or 0.89 percent, to 1,350.52. The Nasdaq Composite Index .IXIC shed 35.15 points, or 1.20 percent, to close at 2,890.15.
At its session low, the Dow was down as much as 239.16 points, or 1.9 percent, at 12,583.41. The S&P 500 fell as low as 1,337.56, down 25.1 points, or 1.8 percent, at its session low. The Nasdaq had touched a session low at 2,852.88, down 72.42 points, or 2.5 percent from Friday's close.
Energy shares slumped as fears of a global slowdown prompted investors to sell oil as U.S. crude fell 3.8 percent. Chevron Corp (CVX.N) dropped 1.1 percent to $107.95. The NYSE Arca oil index .XOI lost 1.7 percent. <O/R>
The CBOE Volatility Index .VIX jumped 14.4 percent to 18.62 at the close. According to the VIX Open Interest Put-to-Call ratio, VIX options traders are holding only 50 puts for every 100 calls outstanding on the VIX. The last time this ratio hit this level was early August of 2011, just before a huge volatility spike that lasted nearly four months, he said.
The euro slid to a two-year low against the dollar and a near 12-year trough against the yen, pressured by fears that Spain may eventually need a full sovereign bailout. <USD/>
The yield on the Spanish 10-year bond was last at 7.496 percent, well over what analysts consider a sustainable level.
Peet's Coffee & Tea Inc PEET.O soared 27.8 percent to $73.05 after striking a deal to be acquired by Joh. A. Benckiser for about $1 billion.
Volume was light, with about 6.13 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.
(Editing by Jan Paschal)