Government borrowing costs rose in Spain and Italy, signaling that investors are worried that those countries might be unable to pay their debt. Across the hobbled continent, uncertainties continued to mount about the Spanish bank bailout, which was announced over the weekend but whose details have not been hammered out.
The Dow Jones industrial average fell as much as 75 points before rising briefly around 10:30 a.m. The gains were short-lived and small, reaching only 16 points. Shortly after 11 a.m., the Dow was down nine points at 12,565.
The Standard & Poor's 500 index and the Nasdaq composite followed similar patterns. The S&P 500 was virtually flat, down half a point at 1,324. The Nasdaq was up four to 2,847.
Spain's 10-year borrowing rate inched up to 6.71 percent from 6.67 percent Tuesday. That is a troubling sign because when the interest rate rises, it means the government is being forced to pay more to persuade investors to buy its bonds. Other countries have had to seek bailouts from their lenders when their borrowing rates hit 7 percent.
Italy has become the newest flashpoint for worry in Europe's debt crisis. The country's 10-year borrowing rate rose to 6.11 percent from 6.02 percent the day before.
In another unnerving sign, Italy held a sale of 12-month bonds, a warm-up for Thursday's weightier long-term debt auction, and had to pay interest of 3.972 percent. That was up sharply from 2.34 percent a month ago.
News about the U.S. economy was hard to read. The government said that retail sales fell in both April and May. But excluding gas station sales, where prices dropped throughout those months, retail sales grew modestly in May.
Richard Ross, global technical strategist at Auerbach Grayson in New York, said he's still bullish on U.S. stocks. He thinks their decline throughout May, which was perhaps a necessary correction, means they're ready to charge ahead.
"I believe that we will look back and say, when the world was afraid of the euro breaking apart, that was a buying opportunity, not the shot across the bow that told us we need to sell everything and put it under the mattress," Ross said.
Ross thinks that the market's lack of direction this week is a result of investors trading on news headlines rather than examining the fundamentals of individual stocks. "The sovereign debt crisis, the Greek elections, the Egyptian elections — if you are basing an investment strategy around these headlines, you will be paralyzed," Ross said.
Slightly more than half of the stocks listed on the New York Stock Exchange rose. Four of the ten major industry indexes in the S&P 500 rose, led by health care.
Big movers included JPMorgan Chase, which rose 74 cents to $34.51 as CEO Jamie Dimon testified to Congress about the bank's surprise $2 billion trading loss. Dell jumped 48 cents to $12.45 after the computer maker said late Tuesday it would begin paying its first shareholder dividend.
Cigarette maker Philip Morris International rose $1.55 to $86.56 after announcing it will buy back more of its own stock. Johnson & Johnson rose 51 cents to $63.59 after announcing it will close its purchase of Synthes, which makes medical devices for orthopedic surgery, on Thursday.
The bailout of Spain's banks was meant to soothe the markets, but the reaction in the U.S. has been inscrutable. U.S. stocks plunged on Monday, then rallied on Tuesday, but that was less about Europe and more about a Federal Reserve leader hinting that the Fed could pump more money into the ailing U.S. economy.
Key details of the bailout have yet to be worked out, including how European leaders would come up with the $125 billion they say they can lend, and how Spain could pay the money back.
The interest rate on the U.S. 10-year Treasury note fell to 1.65 from 1.66 percent. That means investors are moving money into one of the few places where they think it will be safe, with the U.S. government.