By Angela Moon
NEW YORK (Reuters) - Stocks fell on Monday as investors turned cautious ahead of a European Union summit this week that many fear will do little to calm concerns about the escalating euro zone debt crisis.
Energy and bank stocks led the decline on the S&P 500. U.S. crude futures dropped near last week's eight-month low, and news that Spain had requested help for its struggling banks pressured financial stocks.
The S&P 500 energy sector index <.GSPE> was off 2.6 percent and the financial sector index <.GSPF> lost 2.2 percent.
Among individual stocks, Chesapeake
Spain formally requested euro zone rescue loans for up to 100 billion euros ($125 billion) to recapitalize its banks, saying the final amount of assistance would be set at a later stage. Some market economists say it is merely a prelude to a full bailout for Spain.
Spanish government bonds came under pressure with the 10-year bond yield 18 basis points higher at 6.53 percent, near the 7-percent mark that forced other indebted European countries to ask for bailouts.
Markets continue to react to European headlines as the spiraling debt crisis in Europe could further hurt a slowing global economy. Austerity measures pushed forward by Germany have Greece mired in a long recession. Investors worry Spain could follow Greece's path as Madrid's borrowing costs remain stubbornly high.
"Declining oil prices and near-record low bond yields indicate slowing global growth, while elevated sovereign credit spreads and a strong U.S. dollar suggest the European crisis is nowhere near being resolved," said Mandy Xu, equity derivatives strategist at Credit Suisse in New York.
The Dow Jones industrial average <.DJI> was down 165.48 points, or 1.31 percent, at 12,475.30. The Standard & Poor's 500 Index <.SPX> was down 24.05 points, or 1.80 percent, at 1,310.97. The Nasdaq Composite Index <.IXIC> was down 60.61 points, or 2.10 percent, at 2,831.81.
The U.S. Supreme Court said on Monday it will rule on the constitutionality of a 2010 healthcare reform law on Thursday, the last day of the high court term. The Morgan Stanley healthcare payor index <.HMO> dropped 1.6 percent.
A European equity benchmark <.FTEU3> fell 1.5 percent and the dollar, seen as a safe-haven when European markets are volatile, rose as worries about global growth lingered after last week's soft data on manufacturing worldwide. <.EU>
New U.S. single-family home sales surged in May to a seasonally adjusted 369,000-unit annual rate, the highest since April 2010, and prices rose from a year ago amid tightening supply. But the European concerns apparently overshadowed any positive impact as a homebuilding index <.GSPHOME> fell 1.6 percent.
Shares of Bristol-Myers Squibb Co
Wal-Mart Stores Inc> was the only gainer on the Dow. Walmart Canada said the company is opening of 47 hiring centers across Canada to support its growth plans.
(Reporting By Angela Moon; Editing by Kenneth Barry)
