* Portuguese, Italian markets slide, weigh on Europe
* Utilities, telecoms up; 10-yr yield hits lowest since June 2
* Lumber Liquidators tumbles after revised outlook
* Dow off 0.3 pct; S&P off 0.3 pct; Nasdaq off 0.2 pct (Updates to afternoon session)
By Angela Moon
NEW YORK, July 10 U.S. stocks edged lower on Thursday as concerns about the financial health of Portugal's top listed bank gave investors a reason to cash in recent gains.
With the Dow and the S&P 500 near record highs, the slide in Europe triggered by financial shares quickly translated into broad selling on Wall Street. The S&P 500 briefly lost 1 percent earlier, a daily drop the benchmark has not seen since April 10.
Among the day's biggest decliners was Lumber Liquidators which plunged 20.3 percent to $56.15 after the hardwood flooring retailer cut its earnings outlook. The stock fell as low as $54.32, its lowest level since February 2013.
Sandwich chain Potbelly Corp estimated second-quarter revenue and profit below analysts' expectations and its stock plummeted 24.6 percent to $11.05, just above an all-time low of $10.95.
The S&P utilities index and the S&P telecom index , defensive plays favored for their relatively high dividends, rose 0.5 percent and 0.6 percent, respectively. The yield on the 10-year U.S. Treasury note briefly dropped to its lowest since June 2.
"There seems to be a lot of angst in the market short-term but given the fact we had such a run the past couple of weeks, it seems to be more psychological than real," said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.
The Dow Jones industrial average fell 50.96 points or 0.3 percent, to 16,934.65, the S&P 500 lost 5.42 points or 0.27 percent, to 1,967.41 and the Nasdaq Composite dropped 10.69 points or 0.24 percent, to 4,408.34.
Espirito Santo Financial Group, the largest shareholder in Portugal's Banco Espirito Santo, suspended trading in its shares and bonds, citing "material difficulties" at parent company ESI. The bank's shares tumbled 17.2 percent.
Portugal's benchmark stock index fell 4.2 percent and Italy's FTSE MIB slid 1.9 percent. The S&P 500 financial sector index fell 0.5 percent.
Shares of Crumbs Bake Shop Inc rose more than tenfold after CNBC reported that a group including the Fischer family and Marcus Lemonis, an executive who stars on the CNBC show "The Profit," is ready to provide financing for the struggling chain of cupcake shops as a prelude to an acquisition. Earlier this week, Lemonis tweeted links to news stories on Crumbs' demise followed by the words "not so fast."
Crumbs shares shot up 1,351 percent to 45 cents.
Earlier in the session, data showed filings for new U.S. unemployment benefits fell last week to one of the lowest levels since before the 2007-09 recession, a sign of increasing health in the labor market. (Reporting by Angela Moon; Editing by Nick Zieminski)