(BusinessDesk) Equities pulled back on both sides of the Atlantic after Spanish Prime Minister Mariano Rajoy quashed hopes today that a request for European aid was imminent.
Mr Rajoy made the comments after a report by Reuters yesterday that Spain's request for European Union assistance may come as soon as this weekend.
Asking for EU help would allow the European Central Bank to start lowering the debt-laden country's borrowing costs by buying its bonds.
Spain's bonds held onto gains after Mr Rajoy's comments. Yields on the country's 10-year debt were 13 basis points lower at 5.75%, while its two-year note yield was 14 basis points lower at 3.18%, according to Bloomberg.
"Spain being rescued would be good for risk assets and ultimately global growth, but while the benefits are largely priced in, we're still getting conflicting signals that understandably have investors apprehensive," Brian Barish, president of Cambiar Investors in Denver, told Reuters.
"Until we get some kind of clarity we should expect a lot of volatility and difficulty holding onto gains."
In afternoon trading in New York, the Dow Jones Industrial Average fell 0.47%, the Standard & Poor's 500 dipped 0.09%, while the Nasdaq Composite Index declined 0.18%.
Meanwhile, US car sales helped to offset the general market pessimism, bettering expectations. Sales for September are on track to rise about 12% from a year ago.
And all is not lost on Wall Street. The S&P 500 has more than doubled from its lowest level in 12 years in March 2009.
There is more to come according to Bank of America strategists, who predict the S&P 500 will rise to 1600 by the end of 2013, moving well past its record high of 1565.15 set in October 2007, Bloomberg reported. It's near 1440 today.
In Europe, the Stoxx 600 Index ended the day with a 0.3% slide from the previous close. National benchmark stock indexes also declined in the UK and Germany.
While the debt crisis swirls, the earnings outlook in Europe is becoming a wider worry. More analysts are slashing earnings forecasts than are raising them.
The number of analysts cutting their earnings expectations compared with those lifting them, as a percentage of total estimates – so-called earnings momentum – remains negative, according to Thomson Reuters data.
Over a three-month rolling average, momentum for the eurozone is minus 5.3%.
"It's dangerous to bet aggressively against equities and we're not... But it's a balanced view," Christopher Wyllie, chief investment officer at Iveagh, told Reuters.
The euro, however, advanced against the greenback, last up 0.3% to US$1.2924. It also strengthened against the Japanese yen, gaining 0.4%.
"There seems to be a lot of confusion about the actual future stability of Spain," Ravi Bharadwaj, a market analyst in Washington at Western Union Business Solutions, told Bloomberg. "Rajoy's comments are belying this idea in the Spanish government that they'll be able to weather the storm" without help.