Stocks tumble as Spain seeks help for banks

By Andrea Tse with wire reports

Stocks slid Monday, following global markets lower, after Spain requested help for its struggling banks.

The euro also fell as traders worried that a two-day summit of European leaders later this week won't produce a credible solution to Spain's banking crisis, The Associated Press reported. Spain isn't saying how much of the 100 billion euros made available by the European Union it will need. Borrowing costs rose for Spain and Italy in a sign that markets are more skeptical that the countries will be able to pay their debts, AP said.

The Dow Jones Industrial Average ($INDU) was down by 166 points at 12,474. The S&P 500 ($INX) was down by 24 points at 1,311. The Nasdaq Composite ($COMPX) was down by 60 points to 2,833.

Bank stocks were especially weak, as investors fear those stocks would be the first to feel the impact of a freeze-up in Europe's financial system if Spain isn't able to convince markets that it can rescue its tottering banks, AP said. Energy stocks were also big losers after the price of crude oil fell again.

European markets fell sharply, with stocks are down 3% in Spain and Italy. The FTSE in London was off by 1.15%, and the DAX in Germany was falling by 2.11%.

The Hang Seng index in Hong Kong settled down by 0.51%, and the Nikkei in Japan finished lower by 0.72%.

Demand for new homes in the U.S. rose more than expected in May as mortgage rates dropped, Bloomberg reported. The Commerce Department said purchases climbed to an annual rate 369,000, up 7.6% from April and the most since April 2010. Economists surveyed by Bloomberg News expected a rate of 347,000. The new-home supply dropped to its lowest in more than six years.

 

In corporate news, Research In Motion (RIMM) could split its business in two by separating its handset manufacturing unit from its messaging network, according to The Sunday Times, which didn't cite sources. RIM may break off the handset division into a separate listed company or try to sell it, the British newspaper said. Amazon (AMZN) and Facebook (FB) were listed as potential buyers, The Sunday Times said.

 

Anheuser-Busch InBev (BUD), the world's biggest brewer, is in talks to buy the 50% of Corona beer maker Grupo Modelo that it doesn't already own, Reuters reported. The deal could be valued at more than $10 billion.

 

JPMorgan Chase (JPM) will improve risk management of its Chief Investment Office, the unit that racked up more than $2 billion in trading losses, while avoiding big bets on derivative and private-equity investments, The Wall Street Journal reported, citing people close to the bank. But the CIO intends to stick with a strategy permitting a wide variety of other, potentially risky investments.

 

An internal review by senior bankers of what went wrong isn't complete, but early conclusions focus on improving the unit's risk-management processes rather than curtailing investment options or broadly reining in risk, the sources said.

 

More from TheStreet

• 8 Post-Downgrade Bank Stock Bargains
  
• 10 Cities Where You Can Retire Without A Car
• Cramer: Oil Stocks Indicate Lower Oil Prices Coming