Stock futures tumble as Spanish bank failure weighs

Stock index futures fell on Monday as a Spanish government bailout of a local bank refocused attention on Europe's debt crisis, which investors fear could derail the global economy.

The Bank of Spain said Saturday it took over Spanish savings bank CajaSur after a planned merger with another small lender failed. CajaSur accounts for nearly 0.6 percent of assets in Spain's financial system.

In a sign of risk aversion, the euro fell broadly as Spain's move highlighted weakness in the banking sectors of some euro-zone members struggling with budget deficits. Investors fear the bank failure may herald a wider banking and credit crisis in Europe.

"Again Europe is the driving force behind the lower market this morning, with a failed Spanish bank reigniting concerns and reminding investors that problems remain," said Andre Bakhos, director of market analytics at Lek Securities in New York. "Until clarity and resolution are achieved the volatility factor will remain high."

S&P 500 futures fell 10.8 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures dropped 102 points, and Nasdaq 100 futures lost 18.5 points.

The S&P 500 has entered a technical correction, falling more than 10 percent since a peak on April 23, as Europe's troubles have rattled markets. Investors are watching for the S&P 500 to close beneath the May 6 "flash crash" intraday low of 1,065.79, which may signal further losses.

European shares were lower Monday morning, as a rebound in mining shares was offset by worries in the banking sector about the Bank of Spain's move to rescue CajaSur.

Japan's Nikkei average ended down 0.3 percent to its lowest close in more than five months as investors remained wary about taking on more risky assets without assurance that a recent stock slide is over.

Investors will watch existing home sales data for April, due at 10 a.m. EDT, for insight on the strength of the U.S. recovery.

S&P 500 company Campbell Soup Co (CPB.N) reported results early Monday.

U.S. stocks snapped a three-day losing streak on Friday, as investors bought beaten-down shares, including banks, on bets that a financial reform bill won't be as onerous as some had feared.

[Source: By Edward Krudy, Reuters, NY, 24May10]

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