Stocks pull back as Greek vote euphoria fades

Richard Drew / AP

Trader Gregory Rowe, left, and specialist John O'Hara work on the floor of the New York Stock Exchange.

By msnbc.com news services

Stocks sank at Monday?s open as initial enthusiasm over a victory for pro-bailout parties in Greek election was overshadowed by rising Spanish and Italian bond yields.

The Dow Jones industrial average sank as much as 70 points in early trading, but was lately working off that low. In Europe, equity markets reversed early gains, pulled down by European concerns and recent data that points to a deteriorating U.S. economy.

Futures had advanced earlier on news Greece's center-right New Democracy party will try to form a coalition with other parties and Germany indicated it may be willing to grant the fiscally troubled nation more time to meet fiscal targets needed to avoid a euro exit.

New Democracy leader Antonis Samaras said Greece will meet its financial commitments but indicated some adjustments to the bailout agreement need to be made.

But the election results offered little reprieve from contagion concerns as yields on both Italian and Spanish bonds rose, with Spain's 10-year bond yield climbing above the 7 percent level viewed as unsustainable by many analysts.

"[Samaras] is not going to rip up the bailout but he is going to ... look to renegotiate the terms, try to make them a little less onerous while still honoring them," said Ken Polcari, managing director, ICAP Equities in New York.

Related: Greek vote only buys some time in widening euro crisis

"So in that sense, what has really changed -- nothing -- so the focus goes right back to Spain as the fear continues."

The rising yields prompted Spain's treasury minister to urge the European Central Bank to make a firm response to market pressures.

Banking shares, seen as particularly sensitive to euro zone troubles, lost ground. European shares erased early gains and turned negative.

World leaders are expected to put pressure on Europe at the G20 summit on Monday to outline a lasting strategy to save the euro currency and end financial turmoil.

Petsmart Inc said it has increased its quarterly dividend to 16.5 cents a share and authorized a new $525 million share buyback plan.

DSW Inc plunged after the footwear retailer said that it was maintaining its full-year 2012 guidance of $3.25 to $3.40 per share, excluding items. The current Thomson Reuters estimate is for $3.37 per share.

Reuters contributed to this report.

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