Wall St slips as little progress seen in Europe

NEW YORK (Reuters) - U.S. stocks fell on Monday as Europe's aid package for Spanish banks did little to alleviate investor concerns about the region's finances and the slowdown in the wider global economy.

Spanish bond yields rose as a bailout of up to $125 billion for the country's struggling banks failed to quell concerns that Madrid may be locked out of funding markets and forced to seek external help. Some were also concerned that the new debt would subordinate existing bond holders.

The New York-traded stock of Spanish lender Banco Santander fell 2.5 percent to $5.97. Weakness in Europe's financial sector was mirrored in the United States where the S&P financial index <.GSPF> fell 1.2 percent and was the weakest performing sector.

Shares of Morgan Stanley , which has recently been a barometer of concerns about Europe due to perceptions of the investment bank's exposure to the region, fell 2 percent to $13.43.

"This is a realization that Spain, while providing money for its banks, is going to add to its debt-to-GDP ratio, and it's going to potentially subordinate some of the current Spanish sovereign debt, which doesn't make those bond holders happy," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.

"They're borrowing more money, not doing anything about growth," Zemsky said. "Today we're not worried about Spain's banking system falling off a cliff, but other than that, nothing has changed."

Spain's 10-year bond yields ended the day 25 basis points higher at 6.5 percent as an early rally quickly evaporated.

The Dow Jones industrial average <.DJI> dropped 62.33 points, or 0.50 percent, to 12,491.87. The Standard & Poor's 500 Index <.SPX> fell 6.66 points, or 0.50 percent, to 1,319.00. The Nasdaq Composite Index <.IXIC> lost 21.03 points, or 0.74 percent, to 2,837.39.

Investors fear a crisis in Spain would compound the currency bloc's troubles before June 17 elections in Greece, which many think could lead to Greece's exit from the euro zone.

The worries come at a time when economies the world over are showing signs of slowing. China's inflation, industrial output and retail sales all flagged in May. It was the second straight month of sluggish growth.

U.S. companies are finding it more difficult to increase revenue now than at just about any time since the financial crisis. Firms that make up the S&P 500 are expected to boost sales by just 2.2 percent in the current quarter, according to Thomson Reuters data.

Apple Inc Chief Executive Tim Cook opened the company's annual developers conference on Monday, where he is expected to unwrap souped-up software and hardware to help it in its mobile race against Google Inc . Apple's shares gave up early gains to trade up just 0.2 percent at $581.76.

Goldman Sachs is close to striking a deal over the sale of its hedge fund administration business with State Street Corp , the Financial Times reported. The move would create the largest administration services provider to hedge funds worldwide. The stock fell 0.7 percent to $93.86.

(Additional reporting by Rodrigo Campos; Editing by Kenneth Barry)

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