GLOBAL MARKETS-US shares fall, euro down on Spain concerns

Tue Sep 25, 2012 4:34pm EDT

* Stock markets looking for catalyst to extend rally

* Stimulus expectations still underpin markets

* Euro falls vs dollar on Spanish concerns

NEW YORK, Sept 25 (Reuters) - U.S. stocks declined on Tuesday as investors sought a catalyst to justify further gains while the euro was under pressure on concerns about a bailout for debt-laden Spain.

The euro fell and is now around two cents from the 4-1/2-month peak posted against the U.S. dollar last week. Renewed worries about global growth also weighed on markets.

Earlier Wall Street had been buoyed by end-of-quarter buying by funds and a higher-than-expected reading of confidence among American consumers.

But as the day wore on in New York and major U.S asset manager BlackRock said the strong equity rally this year has run its course, the gains were erased and stocks declined.

This is "a market that has rallied and climbed a wall of worry. Right now the market is getting skittish and looking for reasons for buyers to be less aggressive," said Jim Fehrenbach, head of equity distribution at Piper Jaffray in Minneapolis.

The Dow Jones industrial average was down 101.67 points, or 0.75 percent, at 13,457.25. The Standard & Poor's 500 Index was down 15.28 points, or 1.05 percent, at 1,441.61, snapping a three day advance. The Nasdaq Composite Index was down 43.06 points, or 1.36 percent, at 3,117.73.

The MSCI world equity index fell 0.5 percent to 334.52. European shares gained 0.4 percent but that was before the BlackRock news reached investors.

U.S. stocks did rise at the open after comments late on Monday from the President of the San Francisco Fed John Williams suggested the central bank was not done taking action to stimulate the economy.

That initially helped offset a pessimistic outlook from Caterpillar but then Philadelphia Fed President Charles Plosser countered on Tuesday that the latest monetary stimulus will not do much to boost economic growth or lower unemployment. [ID: nL1E8KP91T].

All the negative news ultimately outweighed the good, including a private sector report showing U.S. consumer confidence jumped to its highest level in seven months in September.

Caterpillar shares fell 4.2 percent. On Monday, Caterpillar Inc cut its 2015 profit outlook, warning that weaker commodity prices would result in a bigger-than-expected decline in demand.

NO HUGE BETS

U.S. data showed single-family home prices rose for a sixth month in a row in July, though the improvement was not as strong as expected.

The euro fell 0.2 percent to $1.2907.

The overall support for the single currency's rally in recent weeks was the European Central Bank's offer to provide bailout funds to indebted governments - if they seek its help and are willing to accept tough conditions.

But investors were not making huge bets.

"Fears about Europe's situation remain among investors, with the focus mostly on Spain, but Greece is also still a concern," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.

At the center of market concerns is what happens next in Spain. The government is due this week to present its draft budget for 2013, outline new structural reforms for the economy and release the results of stress tests on the banking sector.

U.S. Treasury debt prices were higher.

The benchmark 10-year U.S. Treasury note was up 13/32, with the yield at 1.6697 percent.

GROWTH CONCERNS

After the recent central bank actions, many investors have become convinced that markets can rally further. But they believe any gains are highly dependent on signs the slowdown in the global economy has bottomed.

"The majority of central banks are in total, outspoken reflationary mode. That's a big story," said Didier Duret, chief investment officer at ABN Amro Private Banking in London.