WALL STREET : Financial Stocks Leads Broadbase Selloff

Fiscal Crisis in Europe
DJIA Breaches 12,400 on Debt-Ceiling Gridlock

Wall Street was in a sour mood today, with stocks sinking on amplified debt concerns on both sides of the Atlantic. In Europe, fears of contagion continued to run rampant, though European Union officials plan to meet on Thursday to discuss the region's deteriorating fiscal situation. On the home front, little progress on the debt-ceiling debate kept buyers on the sidelines, with President Obama vowing to veto a House Republican-backed bill to add a balanced budget amendment to the Constitution. Furthermore, Treasury Secretary Timothy Geithner warned Congress that the clock is ticking, reiterating that Aug. 2 is not a soft deadline on Capitol Hill.

The global financial uncertainty did little to help banking stocks ahead of earnings, with Bank of America (BAC), Morgan Stanley (MS), and Goldman Sachs (GS) all retreating into new-low territory. On the flip side, the CBOE Market Volatility Index (VIX - 20.95) -- or the Street's "fear gauge" -- jumped more than 7%, while a widespread flight to safety sent gold futures north of $1,600 an ounce.

The Dow Jones Industrial Average (DJIA – 12,385.16) gave up 94.6 points, or 0.8%, to end beneath the 12,400 level for the first time since June 29. In fact, Chevron (CVX) was the lone blue chip to eke out a gain, while Bank of America paced the 29 declining equities with a 2.8% drop.

Meanwhile, the S&P 500 Index (SPX – 1,305.44) surrendered 10.7 points, or 0.8%, but maintained a perch atop the 1,300 level. Finally, the Nasdaq Composite (COMP – 2,765.11) swallowed a loss of 24.7 points, or 0.9%, and is now clinging to its 20-day moving average.

ANALYSTS' QUOTES
“Politicians on both sides of the Atlantic are not explaining realities to the voters, and this lack of leadership, as much as anything, remains a barrier to improvements in both market and economic prospects.” 

“The reality is that any solution to U.S. debt problems will require a disciplined plan to both cut entitlement spending and raise taxes over a number of years. Any solution to the European debt problem will eventually require the richer nations in Europe to subsidize the budgets or at least the borrowing costs of their more troubled brethren.” 

“Despite an economy which appears to have grown by just 2% annualized in the first half of 2011, corporate profits have continued to surge.”

For every stock gaining, five fell on the New York Stock Exchange, where volume topped 874 million. The Dow last week lost 177.44 points, or 1.4%, capping its worst week in more than a month. 

TECHNICAL ANALYSIS
Dow Jones Industrial Average
The Dow closed sharply lower on Monday and spiked below the 20-day moving average crossing at 12,357 as it extends this month's decline. The low-range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing at 12,357 would confirm that short-term top has been posted. If the Dow renews the rally off June's low, May's high crossing at 12,876 is the next upside target.

First resistance is the 87% retracement level of the May-June decline crossing at 12,752. 

Second resistance is May's high crossing at 12,876. 

First support is today's low crossing at 12,296. 

Second support is the reaction high crossing at 12,217.

Crude Tumble 1.4% On Slower Demand Expectations
Crude futures took a tumble today, as debt concerns both at home and overseas fueled fears of ebbing demand. Meanwhile, the widespread uncertainty boosted the greenback against most of its rivals, spooking foreign-currency holders from the dollar-denominated asset. By the close, August-dated crude oil futures gave up $1.31, or 1.4%, to settle at $95.93 per barrel.

HAPPY TRADING