* Second Spanish region set to seek bailout, more may follow
* Euro hits 2-year low vs dollar, near 12-year low against
* McDonald's shares down after earnings
* Indexes down: Dow 1.7 pct, S&P 1.5 pct, Nasdaq 2.2 pct
By Edward Krudy
NEW YORK, July 23 (Reuters) - Wall Street tracked a sharp
selloff in global equity markets on Monday as Spain appeared
closer to needing a bailout and fears grew that Greece may be
approaching an exit from the euro zone.
There were also worrying signs from U.S. earnings.
McDonald's Corp fell 2.3 percent to $89.45 after posting
lower-than-expected profit. Its chief executive officer said the
results "reflected the slowing global economy (and) persistent
The Spanish region of Murcia looked set to follow Valencia
in tapping a government program to keep its finances afloat,
while local media reported half a dozen regions were ready to do
German magazine Der Spiegel cited high-ranking
representatives in Brussels saying the IMF may not take part in
any additional financing for Greece. Inspectors from the
European Commission, European Central Bank and International
Monetary Fund arrive in Athens on Tuesday.
Overseas stock and commodity markets fell steeply. European
shares lost 2.6 percent, led by euro zone banking
stocks, a trend the United States followed as shares of Morgan
Stanley fell 2.3 percent to $12.50.
"It was a wipeout in the overseas markets," said Brian
Battle, director of trading at Performance Trust Capital
Partners in Chicago. "We are going to echo that as confidence
gets sucked out."
"The problem is bigger and more intractable than what
happened in (the financial crisis) in '08," he said. "You could
lose 40 points on the S&P today."
The Dow Jones industrial average dropped 211.42
points, or 1.65 percent, to 12,611.15. The Standard & Poor's 500
Index fell 20.92 points, or 1.54 percent, to 1,341.74.
The Nasdaq Composite Index lost 63.47 points, or 2.17
percent, to 2,861.83.
Traders were also focused on a slowdown in the global
economy. China's economic outlook was cut by Japan, its biggest
Asian trading partner, Bloomberg reported.
The euro slid to a two-year low against the dollar and a
near 12-year trough against the yen, pressured by fears that
Spain may eventually need a full sovereign bailout.
Attention has again turned to the potential for Greece to
exit the euro zone. Alexander Dobrindt, a leading German
conservative was quoted on Monday saying Greece should start
paying half of its pensions and state salaries in drachmas as
part of a gradual exit from the euro zone.
"We have the Spanish problem very high on the surface here,
their 10-year rates are now trading at 7.39 percent and you've
got Greece rates starting to rise again," said Paul Mendelsohn,
chief investment strategist at Windham Financial Services in
The yield on the Spanish 10-year bond was last at 7.5
percent, well over what analysts consider a sustainable level.
"Greece is beginning to come back into the headlines on top
of Spain and that's what is causing the volatility; there are
people out there who think we may be approaching the end game."
Spain's IBEX stock index fell 2.4 percent, hitting
its lowest level in nearly a decade. Italy's FTSE MIB
fell nearly 4 percent and hit its lowest level in more than 3