Concern about Spain sends Dow to worst drop of the year

NEW YORK — The stock market extended its longest and deepest slump of the year Tuesday, caught between a recurring nightmare of European debt and the beginning of uncertain corporate earnings reports at home.

The Dow Jones industrial average fell 213.66 points, its biggest decline of the year and third triple-digit loss in four sessions. The 1.7% drop left it at 12,715.93, its lowest since Feb. 2.

A five-day losing streak has shaved about 550 points off the Dow, about half what it gained from January through March.

The S&P finished down 23.61 points, a 1.7% drop that was its worst one-day decline this year, at 1358.59.

The Nasdaq composite index, which eked out a gain in one of the past four sessions, ended down 55.86 points, its worst performance this year, at 2991.22. It closed below 3000 for the first time in a month.

In Europe, concern about the financial health of Spain intensified, and borrowing costs for both Spain and Italy rose considerably. Spain’s borrowing costs crept closer to levels that forced other countries to seek bailouts.

European markets sold off while Wall Street was still sleeping. The main stock indexes in Spain and France closed down about 3%, the equivalent of a 400-point drop in the Dow. Stocks dropped 2.5% in Germany and 2.2% in Britain.

“They’ve managed to put a Band-aid on the debt crisis, but there’s really no solution,” says Colleen Supran, a principal at investment adviser Bingham Osborn & Scarborough. “And Spain is a much bigger problem than Greece.”

The yield on 10-year Spanish bonds rose to almost 6%. The point at which governments can no longer afford to raise money on the international bond markets and must seek bailouts is generally considered to be 7%. The 7% level forced Greece, the last focal point of the European debt crisis, to seek rescue loans. But Spain’s economy is more than five times as large as Greece’s.

In the U.S., investors waited for an earnings report from Alcoa, the first of the 30 stocks in the Dow to report quarterly results. After the bell the aluminum maker reported a profit of 9 cents a share. Analysts had expected a loss of 4 cents.