Stocks slip on eurozone fears

Activists of the Occupy Frankfurt movement have set up a fireplace near the Euro sculpture in front of the European Central Bank in Frankfurt, Germany Nov.3, 2011. The ECB announced to lower their key interest rate to 1.25 percent.
AP Photo/Michael Probst

(CBS/AP) Another flare-up in Europe's debt crisis has knocked U.S. markets lower.

Stock indexes waffled between small gains and losses until news broke in the afternoon that Bankia, a hobbled Spanish bank, asked that country's government for nearly $24 billion in support. The head of Germany's central bank also suggested the country wouldn't support region-wide bonds to prop up Spain and other troubled countries.

Signs of a cool-down in Asia also weighed on investors after Taiwan lowered its growth forecast for the year.

The Dow Jones industrial average dropped 75 points to 12,455 Friday. The Standard & Poor's 500 fell three to 1,318. The Nasdaq fell two to 2,838.

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Rising and falling stocks were evenly matched on the New York Stock Exchange. Volume was thin ahead of the Memorial Day holiday.

Facebook (FB), marking its one week anniversary as a public company, fell 3.4 percent to close at $31.91, still roughly 16 percent below its initial pricing of $38.

Investors have worried about what will happen if Greece leaves the euro, and major markets were down in France, Britain, Germany, Greece and Spain. It's impossible to gauge the exact fallout, but it's likely that traders would dump the bonds of other struggling European countries, such as Spain and Italy, and residents could start to pull money out of banks there.

European leaders are arguing over how to cut the profligate spending of struggling countries without throwing the region further into recession. The messages emanating from Europe were mixed.

The head of Germany's central bank said it was an "illusion" to think allowing euro zone countries to borrow money jointly -- a proposal pushed by other countries -- would solve the crisis.

A top official from the European Central Bank said that the 17 countries that use the euro need an "urgent overhaul" to their structure, including a banking regulator and deposit insurance program that could cover the entire Eurozone.

The parliament of Portugal, which has been pushed close to bankruptcy, endorsed a budget plan that would set legal limits on government spending. Spain's market regulator suspended trading of shares in Bankia, a bailed-out bank that is preparing to ask for even more rescue money from the government.

Markets were rattled in Asia as well. Taiwan lowered its economic growth forecast for the year. Media reports suggested that some of China's biggest banks will miss their annual lending targets for the first time in seven years. China, the world's second-largest economy, has propped up global financial markets in recent years as other countries have slowed.