Wall Street slips on Spain, earnings worries

NEW YORK (Reuters) - Stocks edged lower in a volatile session on Tuesday over uncertainty about a financial bailout for Spain and investor worries that third-quarter U.S. earnings will disappoint.

The Dow was pressured by stocks closely tied to the pace of growth, including Caterpillar Inc and Boeing Co . A major headwind for the economy has been declining demand from Europe, which has been drifting toward recession.

Spanish Prime Minister Mariano Rajoy said a request for European aid was not imminent following a report the country could apply for help soon. Germany has signaled that Madrid should hold off on making its request, according to European officials on Monday.

"The market is reacting more to the (Spain) news because it wants to consolidate after a pretty good run. The market is making this news even bigger than it really is just to make it an excuse to sell," said Frank Gretz, market analyst at Wellington Shields & Co in New York.

The S&P rose nearly 6 percent in the third quarter, lifted by accommodative moves by the Federal Reserve and European Central Bank, which market participants bet would boost flagging growth.

If Madrid were to seek a rescue, it would trigger European Central Bank buying of its bonds and help to ease U.S. investors' nervousness about impact of the euro zone's debt crisis on the U.S. economy.

"Until we get some kind of clarity, we should expect a lot of volatility and difficulty holding onto gains," said Brian Barish, president of Cambiar Investors LLC in Denver.

The Dow Jones industrial average <.DJI> was down 62.05 points, or 0.46 percent, at 13,453.06. The Standard & Poor's 500 Index <.SPX> was down 2.58 points, or 0.18 percent, at 1,441.91. The Nasdaq Composite Index <.IXIC> was down 3.88 points, or 0.12 percent, at 3,109.65.

After trading mixed, all three major indexes turned negative in afternoon trade. Weaker-than-expected results from Mosaic added to worries about the upcoming third-quarter earnings period. Mosaic shares fell 4.7 percent to $55.27.

Vanguard Group, the largest U.S. mutual fund manager, said it was switching 22 of its biggest index funds away from benchmarks provided by MSCI Inc in order to cut costs.

Shares of Chipotle Mexican Grill Inc took a nosedive when hedge fund manager David Einhorn said the restaurant chain will face significant competition and additional costs, making it an attractive "short." The stock fell 4.5 percent to $301.79.

In a presentation at the annual Value Investing Congress in New York, Einhorn highlighted some stocks he expects will rise such as General Motors . GM shares rose 3.3 percent to $23.86.

JPMorgan Chase & Co was sued by New York's attorney general on Monday in the first action to come out of a working group created by President Barack Obama to go after wrongdoing that led to the financial crisis. The civil fraud lawsuit centered on mortgage-backed securities packaged and sold by Bear Stearns, which JP Morgan acquired.

JPMorgan was down 0.5 percent at $40.76.

Car companies reported September sales, with General Motors and Chrysler Group LLC posting gains while Ford Motor Co remained flat.

GM, the largest U.S. automaker, reported a 1.5 percent increase, while Ford reported sales on par with its results from a year earlier. Chrysler showed a 12 percent jump in sales.

PetSmart Inc shares added 1.2 percent to $68.38 after S&P Dow Jones Indices said after Monday's close the company will replace Sunoco in the S&P 500 on October 4.

(Reporting by Angela Moon; Editing by Kenneth Barry)

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