More Pain From Spain

9:00am (EST)

The bulls were held hostage on Wednesday as their one-day rally quickly came to an end as Europe and China once again weighed on Wall Street.

China thwarted Tuesday’s rumor that it might start its own Cash for Clunkers program as its government said it had no intention of providing any additional stimulus measures to help the economy.

Spanish banks were back in focus after word spread the European Central Bank (ECB) rejected their recapitalization plan for Bankia. The euro slid to 2-year lows on the news as some traders seem to betting Spain could now be the lead horse to exit the euro. The EU has suggested a “banking union” for the region but some countries are running out of time, especially Greece, now Spain.

Here in the States, the headlines weren’t any better. Pending Home Sales report fell 5.5% in April versus expectations for a flat reading. After the bell, F5 Networks (FFIV, $107.54, down $0.90) added to its losses, dropping 5% to $102, after its VP of sales resigned which could weigh on Tech today.

The Dow dropped 161 points, or 1.3%, to close at 12,419. The blue-chips traded down to 12,396 and were able to 12,350. The bulls will need to hold this level today and for the rest of the week, if not, there would be risk down to 12,200-12,000 over the near-term. Resistance still remains solid at 12,600.

The S&P 500 declined 19 points, or 1.4%, to end at 1,313. The index tested a low of 1,310 and the bears are pushing a break below 1,300 hard. As you can see from the chart…

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