Europe Sinks Wall Street

Screens were red on Wall Street Monday as Europe’s debt crisis flared again and earnings slowed in the United States.

Major sectors were all in decline with big losses being posted in the financial and commodity sectors.

McDonald’s (MCD) shed 2.9% on a weak profit report.

But the big news was Europe.

Starting with Greece, the “troika” arrived in Athens to review progress towards their budget cutting targets and reports are that the IMF is ready to cut its aid to the country. Over the weekend, Germany’s Vice Chancellor voiced pessimism over Greece’s chance for survival in the European Union, while bond yields in Spain spiked higher over concern that several of its regions will require a bailout from the already troubled central bank.

For the day, the S&P 500 (NYSEARCA:SPY) slid 1.1% while the Dow Jones Industrial Average (NYSEARCA:DIA) fell 127 points.

The Nasdaq 100 (NYSEARCA:QQQ) dropped 1.1% and the Russell 2000 Index (NYSEARCA:IWM) rounded out the losses with a decline of 1.6%.

Also on Monday, Moody’s lowered Germany’s outlook on its AAA rating to negative and downgraded Netherlands and Luxembourg over concerns related to Europe’s mounting debt crisis. Moody’s is worried about the impact that Spain and Italy’s debt will have on the overall credit strength of the European Union.

Other problems concern the fact that the European Stability Mechanism (ESM) won’t be approved by the German Constitutional Court before September and that the temporary facility, the EFSF, is running short of funds necessary for the ongoing bailouts.

Bottom line: Europe continues to roil world markets as the crisis seems to ebb and flow on a near daily basis. The United States is embroiled in the situation as Europe is our largest trading partner, 15% of S&P earnings come from the region and the European Union, in aggregate, is the largest economy in the world. Expect more volatility ahead as this drama intensifies.