Dismal Spanish report takes toll on key U.S. stock indexes

It hardly needed it, but the U.S. stock market on Wednesday got another reminder of how its fortunes are inexorably tied to the European economy.

All three major U.S. stock indexes sank after a dismal report about bad loans on the books of Spanish banks. The day before, U.S. stocks had soared after Spain held a successful auction of two-year bonds.

The results underscored how the stock market can whipsaw on even incremental news out of Europe, and it has done just that for the past couple of weeks. In the 12 trading days of the second quarter so far, the Dow has fallen by triple digits four times, with Europe as a notable factor. Twice, it has risen by that same proportion.

It’s not just the news itself, which can vary from hopeful to horrific and back again in just a couple of days. It’s that investors have been inconsistent in how they react, sometimes shrugging off what seems like significant developments and at other times seizing on what seems piecemeal.

It’s a time when “one headline can get you to change your mind,” said Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “When you go from one day being concerned about Spain to the next day, ‘Oh, they had a good auction,’ that’s a lack of conviction,” meaning investors aren’t sure what to think.

The Dow Jones industrial average fell 82.79 points to 13,032.75. That was a U-turn from Tuesday’s gain of 194 points.

The euro fell and Treasury prices rose. The yield on the 10-year Treasury note fell back below 2 percent and was 1.98 percent in afternoon trading.

The S&P 500 fell 5.64 points to 1,385.14 and the Nasdaq composite index fell 11.37 points to 3,031.45.

New rule on derivatives exempts most companies

Federal regulators have softened a plan to oversee companies that trade financial derivatives, the complex investments that played a central role in the 2008 financial crisis.

The decision defines which companies that trade derivatives will face tougher oversight by regulators. Most companies that deal in derivatives would be exempt.

The Securities and Exchange Commission and Commodity Futures Trading Commission approved the rule unanimously in separate votes Wednesday. The rule says derivatives used by companies to offset their own risk will not come under scrutiny. The higher oversight standard would apply mainly to companies that sell $8 billion or more of the investment products annually.

Internet advertising hits record $31 billion in 2011

Internet advertising reached a record $31 billion last year — a gain of 22 percent over 2010, according to a report released Wednesday by the Interactive Advertising Bureau.

Advertising tied to Internet searches continues to dominate the category, accounting for 46 cents of every dollar spent online. Revenues for search advertising reached $14.8 billion in 2011, an increase of 27 percent from a year earlier.

Mobile advertising showed the fastest growth — amid the popularity of smartphones — and the ability of marketers to deliver timely, relevant ads in a way previously not possible.

— From news service reports