The European issues are completley dominating the market action today. The moves in the S&P 500 are very sharply correlated to the Euor/dollar exchange rate.
Last night there was some piece of good news that inflation in China dropped to 6.2% in August from 6.5% in July. This is good because the emerging world has been pursuing tighter monetary policy to control inflation and maybe we might be reaching a state where they will start to ease up.
In Europe today, the first thing which spooked the market was a the resignation of Jurgen Stark who is a member of the ECB executive board has resigned. He was not supportive of ECB bond buying program. Right now any issue of discord among Europeans is a considered bad as the diversity of the Europeans makes it very hard to get consensus on taking any action. There were also rumors about possibility of a Greek default over the weekend. These rumors were given some credibility when Bloomberg reported that Germany is getting ready to support its banks if Greece defaults, the market really took a hit after these reports.
I think if things pass over smoothly over the weekend, there is a good chance we might see a bounce on Monday. One positive in the market today is that Texas Instruments is rallying even though it lowered its earnings and revenue guidance. It is a good indication that maybe stocks have priced in bad news on the earnings front. But again, Europe is the big wild card which will always present headline risk. This is making investment managers stay on the sidelines and they are just making smaller buys.