Further concerns over the fate of the euro and the debt-ridden European countries dragged the international financial market back down after a brief rebound on Monday.

DEPRESSING CLOSING PRICES

When the New York market closed, the Dow Jones Industrial Average fell 142.97 points, or 1.14 percent, to 12,411.23, bringing one of the largest declines of the year.

Meanwhile, the Standard & Poor's 500 dropped 16.73 points, or 1.26 percent, to 1,308.93, and the Nasdaq Composite Index dropped 48.69 points, or 1.70 percent, to 2,809.73.

The Madrid Stock market IBEX 35 closed down 0.5 percent, while the Spanish risk premium closed at a 521-point high.

Compared to the 6.004 percent last Thursday when the Spanish Treasury was able to place 2.074 billion euros (about 2.589 billion U.S. dollars) on the market, the country's 10-year bonds Monday carried an interest rate of over 6.5 percent, which is extremely close to the peak of 6.6 percent that was reached last November.

Milan stocks also slumped, and bond yields soared amid fresh concerns that Italy may be the next eurozone nation to seek a bailout after Spain.

CHEERFUL MARKET REBOUND

Though the markets ended up with depressing numbers on Monday, they made a cheerful rebound in the morning, as news that the Eurogroup had agreed to offer up to 100 billion euros (about 125 billion U.S. dollars) to aid Spain's teetering banks slightly raised the confidence of investors.

The Madrid Stock market had risen 4.27 percent by 10 a.m. local time (0800 GMT) thanks to an increase of share prices of Spain's banks.

Meanwhile, the Spanish risk premium fell from 488 points to 465 points by mid-morning.

Market confidence also boosted Spain's major companies, with Telefonica, Repsol and Iberdrola seeing moderate increases in share prices.

As Spain is the fourth largest economy of the eurozone and faces the highest banking risk within the single-currency bloc, any move of the country plays an important role in the regional and international financial market.

The opening price of the Dow Jones Industrial Average gained 69.63 points, or 0.55 percent, to 12,623.83, while the Standard & Poor's 500 was up 6.70 points, or 0.51 percent, to 1,332.65. The Nasdaq Composite Index rose 15.50 points, or 0.50 percent, to 2,872.58.

The blue-chip Dow gained nearly 100 points in early trading due to the news of Spain's bank rescue.

Next to the United States and Europe, major stock markets in Asia as well as in Africa were also lifted by news of Spain's bank rescue.

GROWING CONCERNS

However, enthusiasm over the rebound soon faded amid concerns over the details of the bailout and skepticism that any fundamental issues could really be resolved.

"It just kicked the can down the road. It doesn't really solve the fundamental economic problems, neither in Spain, nor anywhere else," said Kenneth Polcari, managing director at ICAP Equities. "That's the same story we've seen with Spain, Greece, Portugal and Ireland. They gave all these countries money, and nobody was dealing the structural problems," he said.

Alessandro Benetton, an analyst from Goldman Sachs, said Spain's move of asking for a bailout is good for the banking system in the short term, but can't solve all of the country's fiscal and macro-economic issues, which are still fundamental to economic recovery.

Everyone is now waiting for a final decision on the bailout plan for Spain. The amount of funds needed for the restructuring of the banking system will be confirmed by an independent audit of the system by June 21.

In the meantime, the rating agency Fitch downgraded Spain's two biggest banks by two notches Monday despite the bailout efforts made by the European Union (EU).

Fitch downgraded the credit ratings of Santander and BBVA banks from A to BBB+, saying that the rating adjustments were primarily based on the downgrade of Spain's sovereign debt ratings to BBB- from A- last week as the country is forecast to remain in recession throughout this year and 2013.

Investors also worried that Italy, whose banking system is short of money, will be the next to fall as a result of the domino effect.

Greece's upcoming election on Sunday dampened the market mood as well as the victory over the current austerity plan may lead to Greece's departure from the single currency bloc and more turbulence in the global financial markets.

"If the leader of the leftist party wins, I think Greece will ultimately end up with exiting the eurozone, and it will be kind of ugly," Polcari said.

"The market is very nervous right now. I do think as the week moves on, as we get close to Sunday, there will be speculations about what the polls are saying, who the winner will be. Then you'll see the market trying to position itself to what it thinks is gonna happen on Sunday," he said.