By PALLAVI GOGOI, Associated Press
NEW YORK (AP) — Investors aren't sold on a rescue of Spanish banks.
Stocks on Wall Street turned lower at mid-morning Monday, reversing earlier gains, after European countries said they would lend Spain as much as $125 billion to save its ailing financial industry.
Stocks in Europe gave up some of their early gains, too, and borrowing rates for Spain on the bond market crept higher, another indication of investor concern.
The Dow Jones industrial average was down 45 points at 12,508. The Standard & Poor's 500 index was down four points at 1,321. The Nasdaq composite was down 12 points at 2,846.
Spain became the fourth European nation to seek a rescue, after Greece, Portugal and Ireland. A financial crisis has gripped Spain since 2008, when a real estate bust caused big losses for many banks.
The markets fear that if Spain's banks fail, it could lead to a financial crisis around the globe and hurt an already fragile world economy.
The rescue for Spanish banks had sent European stocks higher, with France's CAC-40 and the DAX in Germany surging more than 2 percent. Those markets were up less than half a percent later.
The yield on Spanish 10-year bonds climbed 0.29 percentage point to 6.47 percent. It had fallen earlier in the day.
"The Spanish deal is a temporary fix," said Jim Herrick, director of equity trading at Baird & Co. "There are broader issues in the eurozone that still need fixing."
Investors are nervously awaiting an election this weekend in Greece that will help determine whether the country is forced out of the 17-member club of countries that use the euro currency.
And Italy said Monday that its economy contracted by 0.8 percent in the first three months of the year, the worst in three years. That data stepped up the pressure on the Italian government, struggling to fend off the perception that Italy could be next to seek a bailout.
The price of oil also reversed an earlier gain, falling less than a percent to $83.70 a barrel. Investors were buying safer investments like U.S. Treasury notes, sending the yield on the benchmark 10-year note down to 1.60 percent, from 1.64 percent on Friday.
Another factor that's adding to the market worries is China's economic slowdown. A large steelmaker in China, Baoshan Iron & Steel, said it lowered steel prices as demand from makers of appliances and cars slowed.
"China is a big piece of the global economic puzzle," Herrick said. "Any piece of news that comes out from there will be closely scrutinized."
The news sent stocks of steelmakers sharply lower. U.S. Steel fell 4 percent, while AK Steel Holding fell even further, 10 percent, after its stock was downgraded by an analyst.
Later Monday, all eyes will be on Apple at a developers' conference in San Francisco where CEO Tim Cook is expected to show off new iPhone software. The company is expected to reveal new mapping technology that could bump Google map from its de facto spot on Apple products. The stock was up $5.79, or 1 percent, at $586.11.
Other stocks making big moves on Monday:
— Micronetics Inc. nearly doubled, up 94 percent, after the maker of microwave and radio frequency components agreed to a takeover by Mercury Computer Systems Inc.
— EnergySolutions fell 54 percent after the nuclear industry service company appointed board member David Lockwood as its new chief executive, and lowered its full-year adjusted earnings estimate.
— Progress Energy rose over 3 percent after federal regulators cleared Duke Energy's proposed takeover of the company, a deal that will create the nation's largest electric utility.
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