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A Spain bailout may now be imminent. And that has sent U.S. stocks into a freefall.
Spain has submitted a request to the European Union for a bailout of its debt-ridden banks. The request comes on the heels of dual downgrades of the country’s sovereign debt ratings in the past two months – first by Standard & Poor’s in April, then by Fitch earlier this month.
Details about how much a Spain bailout could be have not been made public yet.
Still, the mere request for a bailout by Spain has clearly raised another red flag for U.S. investors about the severity of the European debt crisis. That’s why another major sell-off is taking place – the second of the past three trading days.
The Nasdaq is taking the most lumps, falling 1.9% as of 2 p.m. eastern today. The S&P 500 has fallen 1.65%, while the Dow Jones Industrial Average has dropped 1.2% – or 150 points.
Today’s pullback comes almost on the heels of last Thursday’s 2% drop in U.S. stocks – the largest one-day loss this month.
Spain is one of five euro-zone nations to request a bailout in recent months, joining Greece, Ireland, Portugal and Cyprus on the list of the needy.
The Spain bailout request comes just days before this week’s EU summit. The summit will take place Thursday and Friday, and EU leaders are expected to discuss Greece’s bailout terms and the possibility of creating a new banking union. Few analysts are expecting much substantive to come out of that meeting, however – another reason stocks are nose-diving today.
Chesapeake Energy (NYSE: CHK) is one U.S. stock in particular that’s taking it on the chin today, falling 8.8%. Communications companies Sprint Nextel (NYSE: S) and Nokia (NYSE: NOK) are also tanking, each dropping around 7%.