(REUTERS) - Stocks fell on Monday on lingering concerns over a deal for economic integration in Europe and after Intel cut its revenue outlook.

Italian one-year borrowing costs stayed close to a record high at an auction in a sign that last week's European Union summit failed to reassure investors that the region's leaders were taking the urgent steps required to stem its sovereign debt crisis. An index of European equities fell 1.5 percent.

Last week, the EU decided to set stricter budget rules for the single currency area and to provide up to 200 billion euros in bilateral loans to the International Monetary Fund in response to the turmoil.

Intel Corp. fell 4.2 percent to $23.95 after it cut its fourth-quarter revenue forecast due to hard disk drive supply shortages.

An index of semiconductor makers fell 3.3 percent.

U.S. bank shares were among the worst performers, with the S&P financial sector down 2.7 percent. An index of European bank stocks fell 2.8 percent.

How European banks are trading and how Italian and Spanish bonds are trading are the two things that drive how we open every day, said Jack de Gan, chief investment officer at Harbor Advisory Corp. in Portsmouth, New Hampshire.

The Dow Jones industrial average slid 165.60 points, or 1.36 percent, at 12,018.66. The Standard & Poor's 500 Index was down 21.37 points, or 1.70 percent, at 1,233.82. The Nasdaq Composite Index tumbled 50.20 points, or 1.90 percent, at 2,596.65.

Rating agencies Moody's and Standard & Poor's reminded markets on Monday that the deal reached last week wasn't enough to diminish the chance of sovereign downgrades in the Eurozone in the near to midterm.

Last week, S&P put 15 Eurozone countries on a watch for potential credit rating downgrades.

The cost of insuring euro zone sovereign debt against default rose and the yield on five-year Italian bonds topped seven percent, reflecting market unease with last week's deal.

Resource-related stocks also tumbled as U.S. crude oil futures fell 1.7 percent on deepening concern over Europe, and copper prices dropped 3 percent to a near two-week low.

Alcoa Inc. was off three percent to $9.35, and Freeport McMoRan Copper & Gold Inc. dropped 3.7 percent to $38.29.

(Reporting By Rodrigo Campos; editing by Jeffrey Benkoe)

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