A burst of enthusiasm over a rescue of Spanish banks melted away within hours Monday, and investor anxiety about the troubled finances of Europe grew on both sides of the Atlantic.
Jim Herrick, director of equity trading at Baird & Co., said investors realized "that this Band-Aid approach with Spain will not solve larger problems in Europe and that this could be a long, arduous process."
As investors considered the long-term fate of Europe, Herrick said, "it was time to sell."
European countries committed over the weekend to funnel up to $125 billion to Spain to distribute to its banks, which have been driven almost to insolvency from a bust in real estate prices four years ago.
Market strategists had hoped that the rescue in Spain would at least temporarily ease fear that debt problems in Europe will explode into a world financial crisis and hurt the fragile global economy.
Those strategists had predicted a rally in stocks after the deal was announced. But the relief was short-lived, and investors were still worried about an election Sunday in Greece that could lead to that country's exit from the euro.
In the case of Spain, investors appeared uncertain about whether the rescue would be enough to save the banks and whether the terms of the loan, still undisclosed, would deliver another blow to the recession-hobbled Spanish economy.
France's main stock index closed down 0.3 percent, and Germany's rose just 0.2 percent. Both indexes were up more than 2 percent earlier in the day. Spain's benchmark stock index shot higher by 6 percent but closed down 0.5 percent.
In the United States, the broader market drifted lower all day. The Standard & Poor's 500 index ended down 16.73 points at 1,308.93, and the Nasdaq composite index closed down 48.69 points at 2,809.73.
The Dow finished down 142.97, one of its biggest daily declines this year, at 12,411.23. It opened up almost 100 points.
The yield on Spanish 10-year bonds climbed 0.29 percentage point to 6.47 percent, an indication that bond investors are demanding a higher return to lend money to the Spanish government. The yield had fallen earlier.
The cost of insuring Spanish government debt rose almost to a record high, suggesting investors are more nervous about a Spanish government default, according to Markit, a financial information company.
The yield on the comparable Italian bond crept higher, too — by 0.28 percentage point from Friday to 5.83 percent.
Finance ministers of the 17 countries that use the euro currency said they would make the $120 billion available to the Spanish government to distribute to its banks.
Bond investors were worried that the debt from the rescue package would put additional strain on Spain's finances, though. The European Union made clear Monday that there would be some strings attached besides interest.
"When people lend money, they never do it for free. They want to know what is done with the money," said Joaquin Almunia, the European Competition Commissioner.
Adding to the economic fear, Italy said its economy contracted by 0.8 percent in the first three months of the year, the worst showing in three years. The Italian government is struggling to fend off the perception that Italy will be next to need a rescue.
The price of oil reversed an earlier gain, falling 65 cents to $83.46 a barrel. Investors bought safer investments like U.S. Treasury notes, sending the yield on the benchmark 10-year note down to 1.59 percent from 1.64 percent Friday.
"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 6.5 percent, while AK Steel Holding fell even further, 14 percent, after its stock was downgraded by an analyst on similar concerns.
Apple stock fell $9.15, or 1.6 percent, to $571.17, as investors appeared unimpressed by what the company unveiled at a conference for software developers in San Francisco.
Among other stocks making big moves on Monday:
— EnergySolutions fell $1.97, or 55 percent, to $1.62 after the nuclear industry service company appointed board member David Lockwood as its new chief executive, and lowered its full-year adjusted earnings estimate.