Debt Jitters Overtake Wall Street, Markets Sink

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Fears that the sovereign debt crisis that has slammed euro zone members like Greece may spread to larger economies, coupled with volatile U.S. debt negotiations, sent the markets deep into the red.

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Today's Markets

The Dow Jones Industrial Average slid 94.6 points, or 0.76%, to 12,385, the S&P 500 dipped 10.7 points, or 0.81%, to 1,305 and the Nasdaq Composite slid 24.7 points, or 0.89%, to 2,765. The FOX 50 fell 4.8 points to 925.

Wall Street recovered significantly from session lows, but still closed substantially lower on the day. Financial stocks were hit the hardest on the day, with banking-giants Bank of America (NYSE:BAC) and Citigroup (NYSE:C) both sustaining steep declines.

Lawmakers were still deadlocked over raising the United States debt limit with just two weeks to go before the August 2 deadline set by Treasury Department.  Without raising the level of debt the nation can incur, the U.S. is at risk of potentially defaulting on certain portions of its debt, or failing to make payments to beneficiaries of government programs.

Standard & Poor's and Moody's both warned last week that if the government fails to raise the debt limit, there is a significant chance they will slash the country's coveted triple-A credit rating. Economists and politicians alike have been cautioning for weeks that such a move may have a severely negative impact on global credit markets, and indeed, world economies.

Euro Zone 'Contagion' Fears

Meanwhile, European shares tumbled on Monday amid intensifying concerns over the sovereign debt crisis there.  Several European countries have debt loads that are considerably higher than their total economic and many analysts worry that a default by one could easily ripple throughout the markets there.

"What had been debt turmoil contained to the smaller European peripheral countries, in particular Greece, Ireland and Portugal, has escalated to contagion with the potential to engulf larger nations such as Italy and Spain," analysts at BlackRock wrote in a note to clients.

Despite only eight of ninety banks failing the European bank stress tests revealed late last week, there were concerns among bank analysts that the tests weren't rigorous enough.  Additionally, the tests revealed many banks have a high exposure to troubled European sovereign debt.

"Instead of garnering more confidence, European bank stress tests spurred more concerns," wrote Peter Boockvar, managing director at Miller Tabak + Co., in a research note.

The euro dipped 0.04% against the U.S. dollar, while the greenback gained 0.3% against a basket of world currencies.

Earnings Season Kicks Into High-Gear

A plethora of second-quarter corporate earnings from big-name companies are on tap for this week, with computing-behemoth International Business Machines (NYSE:IBM) set to report after the closing bell on Monday.

Halliburton (NYSE:HAL) posted profits excluding one-time costs of 81 cents a share, easily topping estimates of 74 cents. The oil field giant also saw its revenue jump 35% to $5.9 billion.

Hasbro (NASDAQ:HAS) earned 33 cents a share, excluding one-time charges, on $909 million in revenue.  Wall Street was expecting profits of 39 cents on $855 million in revenue.

Charles Schwab (NASDAQ:SCHW) unveiled earnings of 20 cents a share on sales of $1.2 billion.  The brokerage company's profits came in a penny per share better than analysts forecast, while revenues were in line with expectations.

On the economic front, homebuilder sentiment ticked higher in July, but still remains at highly-depressed levels.  The National Association of Homebuilders/Wells Fargo Housing Market index rose to 15 from a nine-month low of 13 the prior month, slightly better than the 14 analysts forecast.

Gold, seen as a safe-haven during volatile times, jumped to yet another all-time high on Monday. Prices for the precious metal on the futures market climbed $12.30, or 0.77%, to $1,602 a troy ounce.  Silver soared $1.27, or 3.3%, to $40.34 a troy ounce.

Energy markets followed equity markets deep into the red, and were also under pressure on a stronger dollar.

Light, sweet crude fell $1.31, or 1.4%, to $95.93 a barrel.  Wholesale RBOB gasoline fell 3 cents, or 1%, to $3.10 a gallon.

Consumer gasoline prices are higher this week than last week.  A gallon of regular at the pump costs $3.68 on average nationwide, up from $3.66 last month, and also well higher than the $2.72 drivers paid last year, according to the AAA Fuel Gauge Report.

Corporate News

Apple (NASDAQ:AAPL) shares bucked the trend on the day and jumped to an all-time high.

News Corp. (NASDAQ:NWSA) shares tumbled more than 4% in early trading amid jitters over the impact of the widening News of the World phone hacking investigation.  News Corp. owns many media companies including FOX Business Network and FOXBusiness.com.

Foreign Markets

The English FTSE 100 slid 1.6% to 5,753, the French CAC 40 tumbled 2% to 3,651 and the German DAX dipped 1.6% to 7,108.

In Asia, the Japanese Nikkei 225 gained 0.39% 9,974 and the Chinese Hang Seng fell 0.32% to 21,805.

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