European markets were down 2-3% today while US markets finished down 1.5%. Most likely the cause, and despite the pronouncements of the media, one can only be sure that the reporter will oversimplify the reason and perhaps get it totally wrong, the most likely main cause was that investors were underwhelmed by the EU leaders’ agreement Friday.
Add to that the European Central Bank (ECB) announcement that they would not be heavy bond buyers of sovereign debt. Also, Moody’s and Fitch, the other two big credit rating agencies announced today that they would be reviewing their ratings on European sovereign debt in light of the EU leaders summit Friday. S&P announced last week that it would be reviewing ratings.
Finally, throw in the fact that Friday is the day options and futures contract roll over, called quadruple-witching and you have the recipe for a volatile market. Expiration weeks often have big moves, usually Monday or Tuesday.