After a quick tease to the upside on Monday morning, US markets dipped drastically as numerous factors converge this week to keep investors on edge, the most immediate of which - Italian elections - likely played a role in the afternoon drop.  Initial indications from Italy were that the party of economic reform would hold a large percentage of the government after the results were known, but later reports hinted at an impasse, evidence that the potential is there for Burlusconi's party of 'Bunga Bunga' could return to power.  Given the already unstable stance of Europe's economic recovery, investors world wide are hesitant to entertain any event that could grow that instability moving forward.  Regarding Italy, specifically, investors care because the economy there was not too far off from being as big a mess as Greece's before reforms were put into place, and a return to the ways of old could lead to even bigger concerns throughout Europe as a whole. 

That said, it's unlikely that Italian elections alone sparked Monday's broad market sell-off, but they certainly played a part.

More likely it's the gridlock in Washington that had investors anxious at the week's open, and this week could be a volatile one if a budget deal is not reached.  The prospects of drastic cutbacks and furloughs are real and investors - who are fully aware of the impact a slash in defense spending had on the fourth quarter GDP numbers - may be concerned over the impact another round of such cuts could have, especially given the ancillary signs that consumer spending may be on the decline, too.  As described over the weekend, however, those signs could be proven or dispelled once the notable group of retailers slated to report earnings over the coming days offer their own guidance...



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