Stocks were struggling Thursday, as investors focused on concerns about Spain's economy and banking system and reacted to headlines from Greece.
News that some Greek banks face emergency funding needs hurt sentiment and caused a decline in risk assets which have already dropped over the past weeks. Greek politicians who reject conditions for a bailout that is keeping the country's finances afloat are seen likely to win next month's election, adding to worries about Greece leaving the euro zone.
Spain's medium-term borrowing costs rose sharply in a Thursday auction of 3- and 4- year bonds, hardly affecting broad views that Spanish yields are likely to rise further in coming weeks.
"We hadn't seen an auction that went that poorly in Spain since last year, but that's an offshoot of what is really happening, the debate over whether Greece stays or not in the euro zone," said Art Hogan, managing director of Lazard Capital Markets in New York.
Giving investors some respite, Japan's economy grew 1.0 percent in the first quarter, slightly more than expected. A 0.2 percent contraction in the final quarter of 2011 for the world's third-largest economy was revised up to flat.
Spain's El Mundo newspaper reported that customers at troubled Spanish lender Bankia had taken out more than 1 billion euros over the past week. The Spanish government denied the report and Bankia shares fell 11 percent after sliding more than 20 percent earlier.
Wal-Mart shares jumped after the world's largest retailer reported better-than-expected quarterly profit.
Sears Holdings Corp rose after the company said it plans to spin off a large part of its stake in its Canada unit to better focus on its U.S. business.
Reuters contributed to this report.
