US STOCKS-Wall St ends lower on angst over Portugal's bank woes

Reuters - UK Focus

* Portuguese, Italian markets slide, weigh on Europe

* Lumber Liquidators (NYSE: LL - news) tumbles after revised outlook

* Icahn says time to be cautious about U.S. stocks

* Dow off 0.4 pct; S&P off 0.4 pct; Nasdaq off 0.5 pct (Updates to the close)

By Angela Moon

NEW YORK, July 10 (Reuters) - U.S. stocks dropped onThursday as concerns about the financial health of Portugal'stop listed bank gave investors a reason to cash in recent gains.

With the Dow and the S&P 500 near record highs, the slide inEurope triggered by financial shares quickly translated intobroad selling on Wall Street. The S&P 500 briefly lost 1 percentearlier, a daily drop the benchmark has not seen since April 10.

Espirito Santo Financial Group, the largestshareholder in Portugal's Banco Espirito Santo,suspended trading in its shares and bonds, citing "materialdifficulties" at parent company ESI. The bank's shares tumbled17.2 percent. Portugal's benchmark stock index fell 4.2percent and Italy's FTSE MIB slid 1.9 percent.

The S&P 500 financial sector index fell 0.5 percent. Wells Fargo & Co, a component of the S&Pfinancial index, fell 0.7 percent to $51.81. The bank willreport earnings on Friday.

"There seems to be a lot of angst in the market short term,but given the fact we had such a run the past couple of weeks,it seems to be more psychological than real," said BuckyHellwig, senior vice president at BB&T Wealth Management inBirmingham, Alabama.

Among the day's biggest decliners was Lumber Liquidators which plunged 21.5 percent to $55.25 after the hardwoodflooring retailer cut its earnings outlook. The stock fell aslow as $54.32, its lowest level since February 2013.

Sandwich chain Potbelly Corp estimatedsecond-quarter revenue and profit below analysts' expectationsand its stock plummeted 25.1 percent to $10.97, just above anall-time low of $10.91.

The S&P utilities index and the S&P telecom index, defensive plays favored for their relatively highdividends, rose 0.6 percent and 0.8 percent, respectively. Theyield on the 10-year U.S. Treasury note brieflydropped to 2.494 percent, its lowest since June 2.

The Dow Jones industrial average fell 70.54 points or0.42 percent, to 16,915.07. The S&P 500 slid 8.15 pointsor 0.41 percent, to 1,964.68. The Nasdaq Composite dropped 22.83 points or 0.52 percent, to 4,396.20.

With Thursday's decline, the S&P 500 was down 1 percent forthe week and on track for its biggest weekly loss since April.

The Dow fell as much as 180.23 points shortly after theopening bell and then recovered to close about 85 points belowthe 17,000 milestone reached last week.

Just a week ago, the Dow closed above 17,000 for the firsttime, ending at a record of 17,068.26, while the S&P 500 endedat an all-time high of 1,985.44.

Billionaire activist investor Carl Icahn said on Thursdaythat it is time for investors to tread carefully after therun-up in U.S. stock markets.

"In my mind, it is time to be cautious about the U.S. stockmarkets," Icahn said in a telephone interview. "While we arehaving a great year, I am being very selective about thecompanies I purchase."

Among the day's gainers was TRW Automotive Holdings Corp, up 8.2 percent at $98.91 after Bloomberg reported thatthe auto parts supplier had received a preliminary takeoverproposal and was in the process of evaluating it. The stock hitan all-time high of $101.75 earlier.

About 5.84 billion shares traded on U.S. exchanges, in linewith the 5.79 billion average in June, according to data fromBATS Global Markets.

Decliners outnumbered advancers on the New York StockExchange by a ratio of about 2.3 to 1. On the Nasdaq, threestocks fell for every one that rose. (Reporting by Angela Moon; Editing by Nick Zieminski and JanPaschal)

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