Spanish bank crisis hits US markets

Another flare-up in Europe's debt crisis, this time involving a Spanish bank, has pegged back US markets. Stock indexes were fluctuating between small gains and losses until news broke that troubled Spanish lender Bankia had asked the government for 23.8 billion dollars (£15.2 billion) in support. Earlier in the day, Standard & Poor's cut the bank's credit rating to junk status because of deepening uncertainty over its restructuring plans. The Dow Jones industrial average dropped as much as 108 points before closing at 12,454.83, down 74.92 points. Concerns about Europe have sent the Dow on a steady slide this month, erasing most of its gains from the first quarter. It finished the week slightly higher, its first weekly gain for May. The declines were broad. Eight of the 10 industry groups in the Standard & Poor's 500 index fell. The only sectors that rose were utilities and telecommunications, which investors tend to buy when they are nervous about the market. Trading volume was light ahead of the Memorial Day holiday. Facebook, marking its one-week anniversary as a public company, fell 3.4 % to 31.91 dollars (£20.34). Talbots, the women's clothing chain, plunged 41% to 1.51 dollars (96p) after announcing that a deadline expired without a deal to be bought by Sycamore Partners. In addition to the new worries about Spain, the head of Germany's central bank, which has been sceptical of bailing out Greece and other weak European countries, reinforced the point when he said it was an "illusion" to think allowing eurozone countries to borrow money jointly would solve the crisis. The Portuguese parliament endorsed a budget plan that would set legal limits on government spending. In Asia, media reports suggested that some of China's biggest banks will miss their annual lending targets for the first time in seven years, and Taiwan lowered its economic growth forecast for the year. Caterpillar, which relies heavily on demand from China, fell 1%. In other trading, the Standard & Poor's 500 index fell 2.86 points to 1,317.82. The Nasdaq composite fell 1.85 points to 2,837.53. Stock indexes in France, Britain, Germany and Spain rose, while Greece's ATHEX plunged 3.5%. Borrowing rates edged higher for Spain and Italy.