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US Stocks Decline as Spain Bank Bailout Gets Critical Eye

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06/11/2012 | 10:55am EDT

--Stocks erase initial gains after Spain's request for bailout funds

--Europe off highs but remain broadly higher, with Spain leading gains

--Asia markets start overseas rally with sharp gains

 
   By Matt Jarzemsky 
 

NEW YORK--U.S. stocks erased initial gains within an hour of the opening bell, as investors took a critical look at Spain's weekend agreement to seek bailout funds for its banks.

The Dow Jones Industrial Average fell 14 points, or 0.1%, to 12540 in mid-morning trade. The blue-chip average had risen as much as 96 points minutes after U.S. markets opened.

The Standard & Poor's 500-stock index eased one point, or 0.1%, to 1325. Materials shares led declines across seven of the index's 10 sectors. The Nasdaq Composite fell six points, or 0.2%, to 2852.

"I think the market had sort of assumed that Spain was going to capitulate, because it really had no alternative," said Ben Halliburton, managing director at Tradition Capital Management in Summit, N.J. "It doesn't really solve any of the problems; it just pushes back the day of reckoning."

Over the weekend, Spain agreed to a bailout of up to EUR100 billion ($125 billion) in loans from the European Union to assist its banks. European stock markets' initial rallies eroded Monday as investors questioned the implications of the deal. The Stoxx Europe 600 was up 0.6% after trading as much as 1.9% higher. Spain's IBEX-35 saw a 5.9% rally cut to a gain of 0.7%.

Asian markets rallied amid the Spain news and Chinese economic data that were not as bad as some expected, with Japan's Nikkei Stock Average rising 2% and China's Shanghai Composite gaining 1.1%.

In the corporate arena, IntegraMed America rallied 21% after the health-care management company said it was being acquired by Sagard Capital Partners in a $169.5 million deal.

Centene tumbled 26%. The Medicaid insurer lowered its 2012 earnings outlook.

Forest Laboratories eased 2% after lowering its current-year earnings forecast, saying it was hit harder than expected after its depression treatment Lexapro lost patent protection in March.

Diamond Foods dropped 6.8%. The snack maker said it won't meet a deadline to file its delayed quarterly reports and expects to get a delisting warning from the Nasdaq Stock Market, the latest fallout from accounting irregularities unveiled last year. The accounting problems led to the firing of top executives in February and the nixing of its planned purchase of Pringles from Procter & Gamble.

EnergySolutions shed 55% after the provider of nuclear-power services such as plant decommissioning lowered its outlook, citing a slowdown in government and commercial businesses.

Write to matthew.jarzemsky@dowjones.com

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