Stocks dropped on Wednesday for the second consecutive session as minutes from the latest Federal Reserve meeting published Tuesday suggested further monetary stimulus was unlikely and a disappointing Spanish debt auction reawakened euro zone concerns.

Spanish borrowing costs jumped at bond auctions, sparking worry about a recurrence of a euro zone debt crisis and highlighting recession worries in the region.

The PHLX Europe sector index <.XEX> lost 3 percent.

Two Long-Term Refinancing Operations launched by the European Central Bank had helped push euro zone fears to the background and enabled investors to focused on improving domestic data and a supportive monetary policy from the Fed, sending the S&P up more than 27 percent from its October low.

The Spanish bond auction was kind of ugly and a little bit left over from (the Fed) yesterday, said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

Stocks had a big move, people had a lot of profits and all of a sudden things start trickling down, you don't want to get caught with your pants down so guys are getting out.

The Dow Jones industrial average <.DJI> dropped 148.49 points, or 1.12 percent, to 13,051.06. The Standard & Poor's 500 Index <.SPX> declined 15.27 points, or 1.08 percent, to 1,398.11. The Nasdaq Composite Index <.IXIC> fell 49.98 points, or 1.61 percent, to 3,063.59.

Private-sector jobs data from payrolls processor ADP, showing U.S. private employers added 209,000 jobs in March, suggested the labor market was continuing to strengthen, but it was not enough to boost investor sentiment.

The Institute for Supply Management's services-sector index for March fell to 56.0 percent from 57.3 percent in February, the private group reported. Market reaction was muted.

All 10 S&P 500 sectors were down with energy, financial and technology stocks leading the decline. The benchmark S&P index has fallen in eight of the past 12 sessions.

In corporate news, Moody's downgraded the ratings of conglomerate General Electric Co and its finance unit General Electric Capital each by a notch, saying there were material risks associated with its funding model.

Yahoo Inc said it was laying off 2,000 employees, signaling a broad shakeup of the company. The stock edged down 0.8 percent to $15.06.

McDonald's Corp lost 1.5 percent to $97.91 after Goldman Sachs removed the stock from its conviction buy list and cut its price target on the fast food restaurant chain to $110.

Semiconductors weighed on the Nasdaq, as SanDisk Corp slumped 9.5 percent to $43.32 after the flash-memory maker warned that weak demand from mobile phone manufacturers and a glut in supply that has led to lower prices are hurting its revenue and margins. The PHLX semiconductor index <.SOX> lost 2.8 percent.

The European Central Bank held interest rates at a record low of 1.0 percent on Wednesday, as widely expected.

(Reporting By Chuck Mikolajczak; Editing by Chizu Nomiyama)