* Portuguese, Italian markets slide, weigh on Europe
* Utilities, telecoms up; 10-yr yield hits lowest since June 2
* Lumber Liquidators tumbles after revised outlook
* Dow off 0.4 pct; S&P 500 down 0.4 pct; Nasdaq off 0.4 pct (Updates to midday)
By Rodrigo Campos
NEW YORK, July 10 (Reuters) - U.S. stocks pulled well off session lows but were still falling on Thursday as concerns about the financial health of Portugal's top listed bank gave investors a reason to cash in recent gains.
With the Dow and the S&P 500 near record highs, the slide in Europe triggered by financial shares quickly translated into broad selling on Wall Street. The S&P 500 briefly lost 1 percent, a daily drop the benchmark has not seen since April 10.
Espirito Santo Financial Group, the largest shareholder in Portugal's Banco Espirito Santo, suspended trading in its shares and bonds, citing "material difficulties" at parent company ESI. The bank's shares tumbled 17.2 percent. The S&P 500 financial sector index fell 0.8 percent.
Portugal's benchmark stock index fell 4.2 percent and Italy's FTSE MIB slid 1.9 percent. An index of European bank shares dropped 1.7 percent after earlier falling as much as 3.1 percent.
The Dow Jones industrial average fell 71.67 points or 0.42 percent, to 16,913.94. The S&P 500 lost 6.86 points or 0.35 percent, to 1,965.97. The Nasdaq Composite dropped 15.84 points or 0.36 percent, to 4,403.20.
"In a world of global news, you can always find something that is not doing well, whether it is political events in Iraq or banking in Portugal," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
"The real test will be the earnings and that will either give confidence to people to come back in or make them realize the prices they have been paying are just too high."
Some investors in Lumber Liquidators thought they were paying too much. Shares plunged 21.7 percent to $55.17 after the hardwood flooring retailer cut its earnings outlook.
Sandwich chain Potbelly Corp estimated second-quarter revenue and profit below analysts' expectations and its stock plummeted 22.9 percent to $11.29.
Shares of Crumbs Bake Shop Inc rose more than tenfold after CNBC reported that a group including the Fischer family and Marcus Lemonis, an executive who stars on the CNBC show "The Profit," is ready to provide financing for the struggling chain of cupcake shops as a prelude to an acquisition. Earlier this week, Lemonis tweeted links to news stories on Crumbs' demise followed by the words "not so fast."