Concerns that Europe's debt crisis could drag down parts of the continent's banking system rattled global markets on Friday, while the IPO of social network Facebook failed to buoy spirits on Wall Street.

Ratings agency Moody's downgraded 16 Spanish banks late Thursday, three days after downgrading 26 Italian lenders, noting they are vulnerable to huge losses on government debt.

In Spain's case, the lenders are also exposed to tens of billions of euros (dollars) in soured investments in the country's imploded real estate market. Their bad loans have hit an 18-year high, according to new figures compiled by the Bank of Spain.

Worries over Spain were reignited in the past two weeks by the prospect that Greece might leave the 17-country euro union. Anti-bailout political parties made huge gains in general elections on May 6, though that ballot proved inconclusive. Another election will be held on June 17, and the radical left party Syriza is forecast to make gains, possibly becoming the biggest party.