NEW YORK -- For the past few days, the U.S. stock market was able to forget about problems in Europe.
Friday put Europe squarely back in the spotlight.
U.S. stocks fell sharply as escalating problems in Spain jolted investors. Spain’s stock market plunged 6 percent and its borrowing costs spiked after a regional government asked for a financial lifeline.
The drop on Wall Street, which sent the Dow Jones industrial average down as much as 133 points, marked a U-turn for the market. Stocks had risen over the past three days as investors focused on healthy earnings from U.S. companies like Mattel, Honeywell and Coca-Cola.
On Friday, talk of sluggishness in Europe was prevalent as more companies turned in their quarterly results.
Staffing agency Manpower fell 6 percent, to $33.46, and chip maker Advanced Micro Devices fell 13 percent, to $4.22, after reporting that weak demand in Europe had dragged down second-quarter revenue.
Xerox trimmed its earnings forecasts as Europeans bought less equipment. Ingersoll-Rand, whose products include Trane air conditioners, cut its revenue prediction for the same reason. Xerox fell 49 cents to $6.70, and Ingersoll-Rand lost $1.22 to $40.25.
Late Thursday, guitar maker Fender abruptly canceled its plans to go public, blaming "current market conditions" and "concerns about economic conditions in Europe." And General Electric, though its stock edged up 7 cents to $19.87, noted Friday that its orders also fell in Europe.
"We prepared ourselves for a pretty tough year this year, or certainly a volatile year," CEO Jeff Immelt said in a call with analysts. "We haven’t been disappointed." GE’s finance officer, Keith Sherin, said the company is making "a full-court press" to reduce exposure to Europe.
Even the Internet powerhouse Google noted that growth in Southern Europe had slowed, particularly in Spain. But Google also reported higher revenue and profit, and its stock rose $17.76, to $610.82.
All the major U.S. stock indexes fell. The Dow Jones industrial average dropped 120.79 points to 12,822.57. The Standard & Poor’s 500 fell 13.85 to 1,362.66. The Nasdaq composite index lost 40.60 to 2,925.30. All three indicators were down about 1 percent. They eked out tiny gains for the week and are about flat for the month to date.
Despite the generally sour mood in the market, two tech companies soared on their first day of trading. Kayak Software, a travel-booking website, jumped 28 percent, or $7.18, to $33.18. Palo Alto Networks, a technology security company, rose 27 percent, or $11.13, to $53.13.
The broad downturn was an unwelcome change after three days of gains, the Dow’s longest winning streak in more than a month. Until Friday, investors focused on upbeat earnings from U.S. companies. Nearly three-fourths of the companies that have reported second-quarter earnings so far have beat expectations, according to FactSet.
Jeff Mortimer, director of investment strategy for Bank of New York Mellon’s wealth management division, expects Europe’s problems to drag on for a long while.
"There is no quick answer to the issues that they’re wrestling with," he said. "They have a sovereign debt issue, they have a banking issue and they have a growth issue. ... I think we’ll have one eye over there for years."
Spain was the epicenter of the latest European earthquake. Protestors took to the streets to voice their disapproval of government spending cuts. The Treasury minister predicted that the recession would drag on into next year. And the region of Valencia said it needed help from the central government to pay its bills.
Spain did get approval from the other euro countries for a bailout for its struggling banks, but that wasn’t enough to calm investors. The Spanish government’s borrowing costs shot above 7 percent, the rate at which other countries have been unable to afford to borrow money. Spain’s borrowing costs rose to 7.22 percent and its benchmark stock index plunged 6 percent, to 6,246.30.